ROC

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2024

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: 001-41583

Coya Therapeutics, Inc.

(Exact Name of Registrant as Specified in its Charter)

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)

Registrant’s telephone number, including area code: (800) 587-8170

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, par value $0.0001 per share	COYA	The Nasdaq Stock Market LLC

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.

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 Exchange Act). Yes ☐ No ☒

The number of shares of Registrant’s common stock outstanding as of May 7, 2024 was 14,618,172.

Table of Contents

		Page
PART I	Financial Information	3
Item 1.	Financial Statements	3
	Condensed Balance Sheets as of March 31, 2024 (Unaudited) and December 31, 2023	3
	Condensed Unaudited Interim Statements of Operations for the Three Months ended March 31, 2024 and 2023	4
	Condensed Unaudited Interim Statements of Stockholders’ Equity (Deficit) for the Three Months ended March 31, 2024 and 2023	5
	Condensed Unaudited Interim Statements of Cash Flows for the Three Months ended March 31, 2024 and 2023	6
	Notes to the Condensed Unaudited Interim Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27
PART II	Other Information	27
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	28
	Signatures	29

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Part I – Financial Information

Item 1. Financial Statements.

COYA THERAPEUTICS, INC.

CONDENSED BALANCE SHEETS

	March 31,			December 31,
	2024			2023
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	35,989,406		$	32,626,768
Collaboration receivable		-			7,500,000
Prepaids and other current assets		1,344,955			1,069,557
Total current assets		37,334,361			41,196,325
Fixed assets, net		59,109			65,949
Total assets	$	37,393,470		$	41,262,274
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	1,587,943		$	1,155,656
Accrued expenses		2,041,530			2,973,215
Deferred collaboration revenue		689,669			923,109
Total current liabilities		4,319,142			5,051,980
Deferred collaboration revenue		681,287			574,685
Total liabilities		5,000,429			5,626,665
Commitments and contingencies (Note 6)
Stockholders' equity:
Series A convertible preferred stock, $0.0001 par value: 10,000,000 shares authorized, none issued or outstanding as of March 31, 2024 or December 31, 2023		-			-
Common stock, $0.0001 par value; 200,000,000 shares authorized; 14,613,172 and 14,405,325 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively		1,462			1,441
Additional paid-in capital		63,449,125			61,501,801
Subscription receivable		(149,250	)		(11,250	)
Accumulated deficit		(30,908,296	)		(25,856,383	)
Total stockholders' equity		32,393,041			35,635,609
Total liabilities and stockholders' equity	$	37,393,470		$	41,262,274

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

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COYA THERAPEUTICS, INC.

CONDENSED UNAUDITED INTERIM STATEMENTS OF OPERATIONS

	Three Months Ended March 31,
	2024			2023
Collaboration revenue	$	126,838		$	-
Operating expenses:
Research and development		3,138,159			1,231,712
In-process research and development		25,000			-
General and administrative		2,439,841			1,661,544
Depreciation		6,840			6,840
Total operating expenses		5,609,840			2,900,096
Loss from operations		(5,483,002	)		(2,900,096	)
Other income:
Other income, net		431,089			163,634
Net loss	$	(5,051,913	)	$	(2,736,462	)
Per share information:
Net loss per share of common stock, basic and diluted	$	(0.35	)	$	(0.28	)
Weighted-average shares of common stock outstanding, basic and diluted		14,457,839			9,721,847

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

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COYA THERAPEUTICS, INC.

CONDENSED UNAUDITED INTERIM STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

	Convertible Preferred Stock								Additional								Total
	Series A				Common Stock				Paid-In		Subscription			Accumulated			Stockholders'
	Shares		Amount		Shares		Amount		Capital		Receivable			Deficit			Equity
Balance, December 31, 2023		-	$	-		14,405,325	$	1,441	$	61,501,801	$	(11,250	)	$	(25,856,383	)	$	35,635,609
Stock-based compensation expense		-		-		-		-		435,663		-			-			435,663
Exercise of stock options		-		-		1,829		-		1,975		-			-			1,975
Proceeds from subscription receivable		-		-		-		-		-		11,250			-			11,250
Exercise of warrants		-		-		206,018		21		1,509,686		(149,250	)		-			1,360,457
Net loss		-		-		-		-		-		-			(5,051,913	)		(5,051,913	)
Balance, March 31, 2024		-	$	-		14,613,172	$	1,462	$	63,449,125	$	(149,250	)	$	(30,908,296	)	$	32,393,041

	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 over-allotment 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

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

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COYA THERAPEUTICS, INC.

CONDENSED UNAUDITED INTERIM STATEMENTS OF CASH FLOWS

	Three Months Ended March 31,
	2024			2023
Cash flows from operating activities:
Net loss	$	(5,051,913	)	$	(2,736,462	)
Adjustment to reconcile net loss to net cash used in operating activities:
Depreciation		6,840			6,840
Stock-based compensation, including the issuance of restricted stock		435,663			180,387
Acquired in-process research and development assets		25,000			-
Changes in operating assets and liabilities:
Collaboration receivable		7,500,000			-
Prepaids and other current assets		(275,398	)		239,295
Accounts payable		477,265			(270,111	)
Accrued expenses		(844,745	)		(1,283,674	)
Deferred collaboration revenue		(126,838	)		-
Net cash provided by (used in) operating activities		2,145,874			(3,863,725	)
Cash flows from investing activities:
Purchase of in-process research and development assets		(25,000	)		-
Net cash used in investing activities		(25,000	)		-
Cash flows from financing activities:
Proceeds from issuance of common stock upon initial public offering, net of offering costs		-			14,250,311
Proceeds from subscription receivable		11,250			-
Payment of financing costs related to the 2023 Private Placement		(131,918	)		-
Proceeds from the exercise of stock options		1,975			-
Proceeds from the exercise of warrants		1,360,457			-
Net cash provided by financing activities		1,241,764			14,250,311
Net increase in cash and cash equivalents		3,362,638			10,386,586
Cash and cash equivalents as of beginning of the period		32,626,768			5,933,702
Cash and cash equivalents as of end of the period	$	35,989,406		$	16,320,288
Supplemental disclosures of non-cash financing and investing activities:
Conversion of convertible preferred stock upon initial public offering	$	-		$	8,793,637
Conversion of convertible promissory notes upon initial public offering	$	-		$	12,965,480
Subscription receivable related to warrant exercise	$	149,250		$	-

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

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COYA THERAPEUTICS, INC.

NOTES TO 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 since inception, negative cash flows from operations through 2023 and has an accumulated deficit of $30.9 million as of March 31, 2024. 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 March 31, 2024, the Company had cash and cash equivalents of $36.0 million, which is expected to enable the Company to fund its operating expenses and capital expenditure requirements into 2026, 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.

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 gross proceeds of approximately $15.3 million, before deducting underwriting discounts, commissions, and other offering expenses paid by the Company. On January 25, 2023, the underwriters exercised their over-allotment 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 $16.4 million in gross proceeds and $14.1 million in net proceeds in its IPO.

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.

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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 March 31, 2024, and its statements of operations, stockholders’ equity (deficit), and its cash flows for the three months ended March 31, 2024 and 2023. Operating results for the three months ended March 31, 2024 and 2023, are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. The condensed unaudited interim financial statements, presented herein do not contain all of 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, 2023 found in the Annual Report on 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 grant date fair value of stock options (Note 8), the allocation of transaction price as it relates to the Company's DRL Development Agreement, 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.

Collaboration revenues
 

The Company’s revenues have been solely generated through the DRL Development Agreement (Note 9), which falls under the scope of ASC Topic 808, Collaborative Arrangements ("ASC 808") as both parties are active participants in the arrangement that are exposed to significant risks and rewards. While this arrangement is within the scope of ASC 808, the Company analogizes to ASC 606 for some aspects of this arrangement, including delivery of a good or service (i.e. unit of account). Revenue recognized by analogizing to ASC 606 is recorded as collaboration revenue on the statements of operations. The terms of the arrangement includes payments to the Company of the following: nonrefundable, up-front license fees; regulatory and commercial milestone payments and royalties on net sales of licensed products.

In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

The Company's revenue arrangements may include the following:

Up-front License Fees: If a license is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from nonrefundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Milestone Payments: At the inception of an agreement that includes regulatory or commercial milestone payments, the Company evaluates whether each milestone is considered probable of being achieved and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. At each reporting period, the Company assesses the probability of achievement of each milestone under its current agreements.

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Royalties: If the Company is entitled to receive sales-based royalties from its collaborator, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, provided the reported sales are reliably measurable, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

Amounts due to the Company for satisfying the revenue recognition criteria or that are contractually due based upon the terms of the collaboration agreements are recorded as collaboration receivable in the Company’s balance sheet. Contract liabilities consist of amounts received prior to satisfying the revenue recognition criteria, which are recorded as deferred collaboration revenue in the Company’s balance sheet. See Note 9 for a full discussion of the Company’s collaboration arrangement.

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.

In-process research and development

Research and development costs incurred in obtaining technology licenses are charged to in-process 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 6, 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 does not have sufficient 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

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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 March 31, 2024, 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 of securities, such as 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 March 31,
	2024		2023
Common stock warrants		2,286,223		2,174,737
Stock options		1,698,730		1,014,543
		3,984,953		3,189,280

Amounts in the above table reflect the common stock equivalents.

Recently issued but not yet adopted accounting pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07), which requires disclosure of incremental segment information on an annual and interim basis. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 on a retrospective basis. The Company is currently evaluating the effect of this pronouncement on its disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which expands the disclosure required for income taxes. This ASU is effective for fiscal years beginning after December 16, 2024, with early adoption permitted. The amendment should be applied on a prospective basis while retrospective application is permitted. The company is currently evaluating the effect of this pronouncements on its disclosures.

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.

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•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 measured at fair value on a recurring basis:

March 31, 2024 (unaudited)
	Note Reference	Input Level	Fair Value		Carrying Value
Assets:
Cash and cash equivalents (money market funds)		Level 1	$	35,989,406	$	35,989,406

December 31, 2023
	Note Reference	Input Level	Fair Value		Carrying Value
Assets:
Cash and cash equivalents (money market funds)		Level 1	$	32,626,768	$	32,626,768

4. Prepaids and other current assets

Prepaids and other current assets consist of:

	(unaudited)
	March 31,		December 31,
	2024		2023
Prepaid research and development	$	553,724	$	125,000
Prepaid insurance		642,443		858,541
Prepaid other		148,788		86,016
	$	1,344,955	$	1,069,557

5. Accrued expenses

Accrued expenses consist of:

	(unaudited)
	March 31,		December 31,
	2024		2023
Accrued research and development	$	842,480	$	686,883
Accrued payroll		235,400		1,081,262
Accrued professional fees		239,798		481,218
Accrued income tax		723,852		723,852
	$	2,041,530	$	2,973,215

6. Commitments and contingencies, including license and sponsored research agreements

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 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

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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 $0.4 million. The Company 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), of which the Company has paid an aggregate of $0.2 million to date, and an additional approximately $20.0 million 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). In December 2023, the Company granted DRL an exclusive, royalty-bearing right and license to commercialize COYA 302 (Note 9).

ARS 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, which was exercised in December 2022, to acquire an exclusive, royalty-bearing license for two patents, 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 $13.3 million 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 $11.6 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) the Company will pay an aggregate of $11.8 million in developmental milestone payments. The Company will then pay an aggregate of $5.9 million in developmental milestone payments for each Mono Product in each subsequent new indication, and an aggregate of $5.9 million 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.

Patent reimbursements paid by the Company to Methodist and its attorneys are included in general and administrative expenses in the accompanying statements of operations. Such costs were immaterial for the three months ended March 31, 2024 and 2023. In addition to the equity issued to Methodist in 2020 and reimbursement of patent related expenses, the Methodist License requires the Company to make payments of up to $0.4 million 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 $0.1 million 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 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 $1.5 million in research in the area of neurodegenerative diseases performed by HMRI. In return, the Company will gain expanded access to data methods and know-how per the SRA, and, if the research

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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 a new SRA with HMRI, in which the Company agreed to fund approximately $0.5 million through May 2024. The Company incurred $0.1 million in research and development expenses under the SRA during each of the three months ended March 31, 2024 and 2023.

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.

Litigation

Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties, and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. There are no matters currently outstanding.

7. Stockholders’ equity (deficit)

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 March 31, 2024, 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		1,345,825	$	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		201,803	$	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
Common stock warrants issued as compensation for the 2023 Private Placement		319,004	$	7.58	December 2027
		2,286,223

8. 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. The 2021 Plan provides for increases to the number of shares reserved for issuance thereunder each January 1 equal to 4% of the total shares of the Company's common stock outstanding as of immediately preceding December 31, unless a lesser amount is stipulated by the Company's board of directors. Accordingly, 576,213 shares were added to the reserve as of January 1, 2024. As of March 31, 2024, 1,821,070 shares of the Company’s common stock were authorized to be issued, of which 34,545 shares were available for future issuance.

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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 March 31,
	2024		2023
General and administrative	$	267,438	$	132,214
Research and development		168,225		48,173
	$	435,663	$	180,387

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, 2024		1,134,145		$	3.24		8.7
Granted		566,414		$	6.04
Exercised		(1,829	)	$	1.08			$	8,249
Outstanding at March 31, 2024		1,698,730		$	4.18		8.9	$	9,752,881
Exercisable at March 31, 2024		543,396		$	2.76		8.1	$	3,889,268
Vested and expected to vest at March 31, 2024		1,698,730		$	4.18		8.9	$	9,752,881

As of March 31, 2024, the unrecognized compensation cost was $4.1 million, and will be recognized over an estimated weighted-average amortization period of 2.3 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 March 31, 2024 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.

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The grant date fair value of each option grant for the three months ended March 31, 2024 and 2023 was estimated using the Black-Scholes option-pricing model using the following weighted-average assumptions (unaudited):

	Three Months Ended March 31,
	2024			2023
Risk-free interest rate		4.0	%		4.1	%
Expected term (years)	5.7				5.8
Expected volatility		103.37	%		89.71	%
Expected dividend yield		-			-

Restricted stock unit awards

During the three months ended March 31, 2023, the Company issued 16,500 restricted stock units ("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 three months ended March 31, 2023 related to these RSUs.

9. DRL Development Agreement

In December 2023, the Company entered into a Development and License Agreement (the “DRL Development Agreement”) with DR. Reddy's, pursuant to which, among other things, the Company granted to DR. Reddy's an exclusive, royalty-bearing right and license (the "License") to commercialize COYA 302, a proprietary co-pack kit containing low dose IL-2 and CTLA4-Ig, (“COYA 302” or the “Product”) solely for use in patients with amyotrophic lateral sclerosis (“ALS" or the “Field”) in the United States, Canada, the European Union and the United Kingdom (collectively, the “New Territories”). The Company previously granted DRL an exclusive license to obtain regulatory approval and commercialize the Product for ALS and certain other indications in all other countries (other than the New Territories, Japan, Mexico, and in each country in South America), pursuant to the DRL Agreement entered between the Company and DRL, effective as of April 1, 2023 (Note 6). As part of the DRL Development Agreement, the Company is responsible for certain development activities to advance the Product through clinical development ("R&D Services").

The collaboration is managed by a joint steering committee (“JSC”) which is comprised of representatives from both parties. Decisions of the JSC are made by consensus. If the JSC is unable to reach a consensus, and the parties’ executives are not able to resolve the dispute, then Dr. Reddy’s has final decision-making authority, subject to specified limitations (as set forth in the DRL Development Agreement).

Pursuant to the DRL Development Agreement, the Company received an up-front, nonrefundable payment of $7.5 million in January 2024. Additionally, the Company is entitled to receive (i) an additional $4.2 million upon FDA acceptance of an Investigational New Drug ("IND"), application for COYA 302 for the treatment of ALS and (ii) an additional $4.2 million payment upon the dosing of the first patient in the first phase 2 clinical trial for COYA 302 for the treatment of ALS in the United States. The DRL Development Agreement also calls for up to an aggregate of approximately $40.0 million in development milestones and up to an aggregate of approximately $677.3 million in sales milestones, related to the New Territories, should all such development and sales milestones be achieved. The Company will also be owed royalties by Dr. Reddy's on Net Sales (as defined in the DRL Development Agreement) of the Product in the low to mid-teens.

Both parties shall discuss in good faith and agree in writing on the terms of a commercial supply agreement for the purpose of supply of COYA 302 to Dr. Reddy’s. No such agreement has been entered into at the time of the filing of this Quarterly Report on Form 10-Q.

The DRL Development Agreement expires on a country-by-country basis upon expiration of Dr. Reddy's obligation to make royalty payments for Product in each territory. Dr. Reddy's has the right to terminate the agreement upon specified prior written notice to the Company. Additionally, either party may terminate the agreement in the event of an uncured material breach of the agreement by, or insolvency of, the other party. Either party may terminate the agreement in the event that the other party commences a legal action challenging the validity, enforceability or scope of any licensed patent rights.

In accordance with the guidance, the Company identified the following commitments under the arrangement: 1) the License and 2) the R&D Services. The Company determined that these two commitments represent distinct performance obligations for purposes of recognizing revenue as the Company fulfills these performance obligations. The Company included the $7.5 million upfront payment in the transaction price as of the outset of the arrangement and allocated that transaction price to the two performance obligations based on the estimated stand-alone selling prices at contract inception. The stand-alone selling price of the License was based on a discounted

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cash flow approach and considered several factors including, but not limited to, discount rate, development timeline, regulatory risks, estimated market demand and future revenue potential using an adjusted market approach. The stand-alone selling price of the R&D Services was estimated using the expected cost-plus margin approach. The Company has recognized the License portion of the transaction price of $6.0 million in prior periods upon delivery of the License. The Company will recognize the remaining transaction price of $1.5 million allocated to the R&D Services over the period of performance, using an inputs approach. During the three months ended March 31, 2024, the Company recognized $0.1 million of collaboration revenue, which was included in deferred revenue as of December 31, 2023, associated with the performance of R&D Services. Any portion of a change in transaction price that is allocated to a satisfied or partially satisfied performance obligation will be recognized as revenue (or as a reduction in revenue) in the period of the transaction price change on a cumulative catch-up basis. The commercial milestones and sales-based royalties will be recognized when earned (i.e., the later of when the subsequent sales occur or the performance obligation has been satisfied). As of March 31, 2024, $1.4 million of the upfront payment was recorded in deferred revenue in the accompanying balance sheets, of which $0.7 million is estimated to be recognized within one year.

10. Subsequent events

The Company has evaluated subsequent events through May 9, 2024, the date at which the condensed unaudited interim financial statements were available to be issued and has determined that there are no such events to report.

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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.

CAUTIONARY NOTE REGARDING 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:

•our ability to develop, obtain regulatory approval for and commercialize our product candidates;

•the timing of future investigational new drug, or IND, submissions, initiation of preclinical studies and clinical trials, and timing of expected clinical results for our product candidates;

•our success in early preclinical studies, which may not be indicative of results obtained in later studies or clinical trials;

•the impact of COVID-19 and resulting pandemic on our preclinical studies and any future clinical trials;

•the potential benefits of our product candidates;

•our ability to identify patients with the diseases treated by our product candidates, and to enroll patients in clinical trials;

•the success of our efforts to expand our pipeline of product candidates and develop marketable products through the use of our therapeutic modalities;

•our expectations regarding collaborations and other agreements with third parties and their potential benefits;

•our ability to obtain, maintain and protect our intellectual property;

•our reliance upon intellectual property licensed from third parties;

•our ability to identify, recruit and retain key personnel;

•our current and future capital requirements to support our development and commercialization efforts for our product candidates and our ability to satisfy our capital needs;

•our ability to raise additional capital, which 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 and financial markets in the United States;

•our financial performance;

•developments or projections relating to our competitors or our industry;

•the impact of laws and regulations;

•our expectations regarding the time during which we will be an emerging growth company under the JOBS Act; and

•other factors and assumptions described in this Quarterly Report on Form 10-Q under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Overview”, and elsewhere in this Quarterly Report on Form 10-Q.

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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.

Overview

We are a clinical-stage biotechnology company focused on developing proprietary new therapies to enhance the function of regulatory T cells ("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 potential 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 potential therapeutic modalities: Treg-enhancing biologics, Treg-derived exosomes, and autologous Treg cell therapy. “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. Our core focus is to develop these therapies to target Treg dysfunction, which has been identified to be an important pathophysiological component of neurodegenerative, autoimmune, and metabolic diseases, where new and effective therapies are urgently needed.

Our lead asset, COYA 302, is a Treg-enhancing biologic, which has been developed from key learnings established in our early work and discoveries of our autologous Treg cell therapy asset. Our autologous Treg cell therapy program has completed a Phase 1 and Phase 2a studies in amyotrophic lateral sclerosis, or ALS. We believe the clinical data from these initial studies 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 and key biomarkers of disease progression and drug effect, 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. We believe our findings have also established mechanistic benefits of combination biologics to address Treg dysfunction as well as highlighted important advantages of scalability and cost.

COYA 302 is the combination of our proprietary low dose interleukin-2 (COYA 301, or LD IL-2) and the immunomodulatory drug CTLA4-Ig, and we believe this combination has the potential to provide a sustained and durable effect on our first series of indications (neurodegenerative disorders) through targeting of multiple pathways. Our research and clinical efforts have led us to believe that combination biologics using our LD IL-2 as a backbone modality could be the best way to treat neurodegenerative conditions that are inherently driven by a complexity of pathways. We believe COYA 302 represents the most clinically advanced of what we hope will be a family of combination therapies that all feature our LD IL-2. Moreover, given its growing list of indications, we can now refer to COYA 302 as a “Pipeline in a Product.”

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, the public offering of our securities that closed in January 2023 and private securities offerings. Our net losses were $5.1 million and $2.7 million for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024, we had an accumulated deficit of $30.9 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

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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:

•continue our ongoing and planned research and development of our product candidates;

•initiate nonclinical studies and clinical trials for any additional product candidates that we may pursue;

•continue to scale up external manufacturing capacity with the aim of securing sufficient quantities to meet our capacity requirements for clinical trials and potential commercialization;

•establish a sales, marketing and distribution infrastructure to commercialize any approved product candidates and related additional commercial manufacturing costs;

•develop, maintain, expand, protect and enforce our intellectual property portfolio, including patents, trade secrets and know-how;

•acquire or in-license other product candidates and technologies;

•add clinical, operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts; and

•incur additional legal, accounting, investor relations and other expenses associated with operating as a public 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.

Product Developments

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, or DRL_AB, licensed from Dr. Reddy's Laboratories Ltd., or DRL) in patients with ALS. We are now preparing for an IND filing with the FDA in the second quarter of 2024. We intend to initiate a Phase 2 trial after the acceptance of our IND application by the FDA.

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) the study treatment 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 the summer of 2024. On October 9, 2023, we announced that this study was fully enrolled with 38 patients. The study will evaluate the safety and tolerability, biological activity, blood and

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cerebrospinal fluid biomarkers, neuroimaging, and changes in cognitive function of LD IL-2 compared to placebo at pre-specified timepoints over the course of the 21-week treatment period and at 9 weeks after the last dose of study treatment.

Pipeline Expansion

In January of 2024, we announced that we are expanding our pipeline in neurodegenerative conditions for COYA 302 beyond ALS to include FTD and PD. Our updated pipeline can be viewed below. More recently, in February of 2024, we announced our expansion of COYA 302 to AD. This expansion advances our approach of combination biologics with low dose IL-2 as a backbone which we believe may represent a new approach to target complex immune pathways in neurodegenerative diseases.

FTD, AD and PD share a similar disease pathogenesis to ALS that is associated with a heightened proinflammatory cascade involving dysfunctional Tregs and proinflammatory microglia and macrophages. We believe the biological redundancies in molecular immune pathways in these complex diseases limit the efficacy of many single drug therapies, requiring the development of novel therapeutics that can address this pathophysiologic complexity.

We intend to file an IND for COYA 302 for the treatment of FTD before the end of 2024. In addition, studies in animal models of PD are planned in 2024, and based on those studies, a subsequent IND filing is anticipated for the treatment of PD. We will await the results of the ongoing double-blind placebo-controlled trial being conducted by Dr. Appel of low dose IL-2, one of the key components of COYA 302, prior to determining our development plan for COYA 302 in AD patients.

Financings

On December 5, 2023, we entered into a Securities Purchase Agreement with certain accredited investors for the issuance and sale in a private placement of 4,370,382 shares of our common stock, or the 2023 Private Placement, at a price of $6.06 per share which resulted in net proceeds of approximately $24.0 million. In connection with the 2023 Private Placement, we issued to the placement agents and our financial advisor warrants to purchase up to an aggregate of 319,004 shares of common stock with an exercise price of $7.58 per share. These warrants have a term of four years from issuance, and will be exercisable beginning six months from the closing of the 2023 Private Placement.

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 $15.3 million, before deducting underwriting discounts and offering expenses. We issued the underwriters an additional 213,500 warrants with an exercise price of $6.25 per warrant as additional consideration. We granted the underwriters a 30-day over-allotment option to purchase up to an additional 290,000 shares of common stock and warrants to purchase 145,000 shares of common stock at 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. Upon the sale of the over-allotment option, we issued the underwriters an additional 16,646 warrants with an exercise price of $6.25 per warrant.

Components of Results of Operations

Collaboration Revenue

To date, we have not recognized any revenue 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. Collaboration revenue represents revenue from the Development and License Agreement, or DRL Development Agreement, pursuant to which we granted DRL, and its affiliate, Dr. Reddy’s Laboratories SA, or collectively, Dr. Reddy's, an exclusive, royalty-bearing right and license to commercialize COYA 302, solely for use in patients with ALS in the United States, Canada, the European Union and the United Kingdom, or collectively, the New Territories.

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Operating Expenses

Research and Development Expenses

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

•Expenses incurred to conduct discovery-stage laboratory work and preclinical studies including supplies, reagents, chemicals as well as external costs of funding research performed by third parties including consultants, academic and other institutions and clinical research organizations, or CROs that conduct our preclinical and nonclinical studies;

•activities being performed under our sponsored research arrangement with Houston Methodist;

•personnel expenses, including salaries, benefits and stock-based compensation expense for our employees engaged in research and development functions;

•clinical trial expenses and related clinical expenses to obtain regulatory approval of our therapeutic candidates including costs of research performed by third parties, costs associated with CRO’s that conduct our clinical trials, costs to operate, manage, and monitor investigative sites and clinical, regulatory, manufacturing and other professional services;

•clinical expenses incurred under agreements with contract manufacturing organizations, or CMOs, or incurred directly by us for manufacturing scale-up expenses and the cost of acquiring and manufacturing preclinical study and clinical trial materials;

•fees paid to consultants who assist with research and development activities;

•expenses related to regulatory activities, including filing fees paid to regulatory agencies; and

•allocated expenses for facility costs, including rent, utilities, depreciation and maintenance.

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 potential therapeutic modalities, multiple product candidates, and multiple potential 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 potential 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 2024 to increase over 2023 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.

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

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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

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

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.

Other Income, Net

Other income, net consists primarily of interest earned on our excess cash.

Income Taxes

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.

Results of Operations

Comparison of the three months ended March 31, 2024 and 2023

	Three Months Ended March 31,
	2024			2023			Change
Collaboration revenue	$	126,838		$	-		$	126,838
Operating expenses:
Research and development		3,138,159			1,231,712			1,906,447
In-process research and development		25,000			-			25,000
General and administrative		2,439,841			1,661,544			778,297
Depreciation		6,840			6,840			-
Total operating expenses		5,609,840			2,900,096			2,709,744
Loss from operations		(5,483,002	)		(2,900,096	)		(2,582,906	)
Other income:
Other income, net		431,089			163,634			267,455
Net loss	$	(5,051,913	)	$	(2,736,462	)	$	(2,315,451	)

Research and Development Expenses

Research and development expenses increased by $1.9 million from $1.2 million for the three months ended March 31, 2023 to $3.1 million for the three months ended March 31, 2024. The increase was due to a $1.7 million increase in our preclinical expenses

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and a $0.2 million increase in internal research and development expenses. External research and development expenses include fees paid to CROs and CMOs and fees paid to regulatory, clinical trial and manufacturing professional service firms largely in connection with preclinical activities necessary to prepare COYA 302 for its initial IND filing and launch of a Phase 2 clinical trial. We expect these expenses to continue to grow in the second quarter of 2024. Once the IND for COYA 302 has been approved, we intend to separately classify the expenses for COYA 302 in the table below under “Clinical Product Candidates.”

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 preclinical, and external and internal expenses are summarized in the table below:

	For the Three Months Ended March 31,
	2024		2023
Preclinical product candidates:
COYA 200 Series	$	-	$	7,684
COYA 300 Series		2,495,289		746,961
Sponsored research		101,986		130,000
Internal costs:
Internal research and development expenses, including stock-based compensation		540,884		347,067
Total	$	3,138,159	$	1,231,712

General and Administrative Expenses

General and administrative expenses increased by $0.7 million from $1.7 million for the three months ended March 31, 2023 compared to $2.4 million for the three months ended March 31, 2024. The increase was primarily due to an increase in personnel related expenses and consulting fees as we continue to expand our operations to support our research and development efforts.

Other Income, Net

Other income, net increased by $0.3 million from the three months ended March 31, 2023 compared to the three months ended March 31, 2024. The increase is primarily due to interest and dividend income earned on cash balances.

Liquidity and Capital Resources

Overview

Since our inception, we have incurred operating losses and incurred negative cash flows from our operations through 2023. 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 March 31, 2024 we have funded our operations through the sale of convertible promissory notes and convertible preferred stock, our IPO, the 2023 Private Placement, and the DRL upfront payment. As of March 31, 2024 we had $36.0 million in cash and cash equivalents and had an accumulated deficit of $30.9 million. We expect our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into 2026. 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.

Funding Requirements

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:

•the scope, timing, progress and results of discovery, preclinical development, laboratory testing and clinical trials for our product candidates;

•the costs of manufacturing our product candidates for clinical trials and in preparation for marketing approval and commercialization;

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•the extent to which we enter into collaborations or other arrangements with additional third parties in order to further develop our product candidates;

•the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;

•the costs and fees associated with the discovery, acquisition or in-license of additional product candidates or technologies;

•expenses needed to attract and retain skilled personnel;

•costs associated with being a public company;

•the costs required to scale up our clinical, regulatory and manufacturing capabilities;

•the costs of future commercialization activities, if any, including establishing sales, marketing, manufacturing and distribution capabilities, for any of our product candidates for which we receive marketing approval; and

•revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval.

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.

Cash Flows

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

	Three Months Ended March 31,
	2024			2023
Cash provided by (used in) operating activities	$	2,145,874		$	(3,863,725	)
Cash used in investing activities		(25,000	)		-
Cash provided by financing activities		1,241,764			14,250,311
Net increase in cash and cash equivalents	$	3,362,638		$	10,386,586

Operating Activities

During the three months ended March 31, 2024, cash provided by operating activities was $2.1 million. Cash provided by operating activities reflected our net loss of $5.1 million, offset by a $6.7 million net increase in our operating assets and liabilities and noncash charges of $0.4 million related to stock-based compensation. The net increase in our operating assets was mainly related to the receipt of a $7.5 million payment from DRL pursuant to the DRL Development Agreement during the three months ended March 31, 2024.

During the three months ended March 31, 2023, we used $3.9 million of cash in operating activities. Cash used in operating activities reflected our net loss of $2.7 million and a $1.3 million net decrease in our operating assets and liabilities, partially offset by noncash charges of $0.2 million related to stock-based compensation. The primary use of cash was to fund our operations related to the development of our product candidates.

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Investing Activities

During the three months ended March 31, 2024, we purchased $25,000 of in-process research and development assets. There were no such activities during the three months ended March 31, 2023.

Financing Activities

During the three months ended March 31, 2024, financing activities provided $1.2 million of cash from the proceeds received from the exercise of warrants of $1.3 million, partially offset by $0.1 million in payments of offering costs related to the 2023 Private Placement.

During the three months ended March 31, 2023, financing activities provided $14.3 million of cash from the issuance of common stock upon our initial public offering, net of deferred financing costs.

DRL Development Agreement

In December 2023, we entered into the DRL Development Agreement with Dr. Reddy's, pursuant to which, among other things, we granted to Dr. Reddy's an exclusive, royalty-bearing right and license to commercialize COYA 302 solely for use in patients with ALS in the United States, Canada, the European Union and the United Kingdom, or collectively, the New Territories. We previously granted DRL an exclusive license to obtain regulatory approval and commercialize COYA 302 for ALS and certain other indications in all other countries (other than the New Territories, Japan, Mexico, and in each country in South America), pursuant to the License and Supply Agreement entered between with DRL, or the DRL Agreement, effective as of April 1, 2023. COYA 302 is comprised of two components, COYA 301 and DRL_AB. In accordance with the DRL Agreement, we in-licensed DRL_AB for the development and commercialization of COYA 302. Further, under the DRL Development Agreement, Dr. Reddy’s is responsible for the development of DRL_AB. We will have the responsibility for the clinical development of COYA 302 and for seeking regulatory approval in the United States for COYA 302 in ALS.

The collaboration is managed by a joint steering committee, or JSC, which is comprised of representatives from both parties. Decisions of the JSC are made by consensus. If the JSC is unable to reach a consensus, and the parties’ executives are not able to resolve the dispute, then Dr. Reddy’s has final decision-making authority, subject to specified limitations (as set forth in the DRL Development Agreement).

Pursuant to the DRL Development Agreement, we received an up-front, nonrefundable payment of $7.5 million in January 2024. Additionally, we are entitled to receive (i) an additional $4.2 million upon FDA acceptance of an Investigational New Drug, or IND, application for COYA 302 for the treatment of ALS and (ii) an additional $4.2 million payment upon the dosing of the first patient in the first phase 2 clinical trial for COYA 302 for the treatment of ALS in the United States. We anticipate an IND filing will be made in the second quarter of 2024. The DRL Development Agreement also calls for up to an aggregate of $40.0 million in development milestones and up to an aggregate of $677.3 million in sales milestones, related to the New Territories, should all such development and sales milestones be achieved. We will also be owed royalties by Dr. Reddy's on Net Sales (as defined in the DRL Development Agreement) of COYA 302 in the low to mid-teens (prior to paying royalties due pursuant to previously disclosed license agreements related to COYA 302).

Off-Balance Sheet Arrangements

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.

Critical Accounting Policies

During the three months ended March 31, 2024, 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 2023 Annual Report filed on Form 10-K.

Commitments and Contingencies, including License and Sponsored Research Agreements

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Patent Know How and License Agreement with The Methodist Hospital

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 $0.3 million in the aggregate, and (ii) related to the treatment of each other indication (that is not ALS) totaling between $0.2 million and up to $0.4 million 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 $0.1 million 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.

Sponsored Research Agreement with Houston Methodist Research Institute

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 executed a new SRA on May 4, 2023, to fund $0.5 million through May 2024.

ARScience License Agreement

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 $0.1 million.

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 $13.3 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 $11.8 million in developmental milestone payments. We will then pay an aggregate of $5.9 million in developmental milestone payments for each Mono Product in each subsequent new indication, and we will owe an aggregate of $5.9 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 $0.1 million 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.

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Dr. Reddy's License and Supply 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 $0.4 million. 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).

Recent Accounting Pronouncements

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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

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 March 31, 2024. 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 March 31, 2024, 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.

Evaluation of Changes in Internal Control over Financial Reporting

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.

PART II – Other Information

Item 1. Legal Proceedings.

None.

Item 1A. Risk Factors.

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, 2023 filed with the Securities and Exchange Commission, or SEC, on March 19, 2024. 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.

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Insider Trading Arrangements and Policies

During the quarter ended March 31, 2024, none of the Company’s directors or officers adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as those terms are defined in Regulation S-K, Item 408, that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c).

Item 6. Exhibits.

Exhibit Number	Description
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 as its XBRL tags are embedded within the Inline XBRL document.
101.SCH	Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents
104	Cover page formatted as Inline XBRL and contained in Exhibit 101

* Filed herewith.

** Furnished, not filed.

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SIGNATURES

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

	Coya Therapeutics, Inc.
Date: May 9, 2024	By:	/s/ Howard Berman
		Howard Berman
		Chief Executive Officer
		(Principal Executive Officer)
Date: May 9, 2024	By:	/s/ David Snyder
		David Snyder
		Chief Financial Officer and Chief Operating Officer
		(Principal Financial and Accounting Officer)

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