# Coya Therapeutics, Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [Coya Therapeutics, Inc.](/companies/coya.md) (CIK 1835022)
- Form: 10-Q
- Filed: 2023-11-08
- Accepted by EDGAR: Nov 8, 2023, 14:07 ET
- Period: 2023-09-30
- Accession: 0000950170-23-060718
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1835022/000095017023060718/coya-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1835022/000095017023060718/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$3.6m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$9.7m | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$3.4m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | −$9.3m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.34 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | −$0.94 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.34 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | −$0.94 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 9,947,915 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 9,873,387 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | −$8.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2023-09-30 | $10.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $11.8m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $11.9m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $1.8m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $1.8m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-09-30 | $10.1m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 50,991 characters.

*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.

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

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

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

Our operations have consisted of developing our clinical and preclinical product candidates and we have devoted substantially all of our resources to developing product and technology rights, conducting research and development, organizing and staffing our company, business planning and raising capital. We have funded our operations primarily through private convertible preferred stock offerings, a convertible debt financing and the public offering of our securities that closed in January 2023. Our net losses were $3.4 million and $4.0 million for the three months ended September 30, 2023 and 2022, respectively. Our net losses were $9.3 million and $9.1 million for the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023, we had an accumulated deficit of $27.1 million. Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, general and administrative expenditures. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our current or future product candidates.

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

- 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.

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

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

### Recent 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, licensed from Dr. Reddy's Laboratories, or DRL\_AB) in patients with ALS. We are now preparing for an IND filing with the FDA in the first half 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) COYA 301 appeared to be well tolerated as no serious adverse events were reported. Currently, an ongoing academic Phase 2 double blind, placebo controlled, randomized trial for use of low dose IL-2 in mild to moderate AD patients is underway at Houston Methodist and we anticipate reporting top line data in 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 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.

During the third quarter of 2023, we increased the size of our Board of Directors from five to six, with the appointment of Dieter Weinand. In connection with the appointment of Mr. Weinand to our Board of Directors, the Board of Directors increased the size of the Audit Committee and Nominating and Governance Committee from three to four directors, with Mr. Weinand being appointed to fill each of the newly created vacancies.

On January 3, 2023, we closed our initial public offering, or IPO, of 3,050,000 shares of our common stock and accompanying warrants to purchase up to 1,525,000 shares of common stock. The warrants were offered and sold at the rate of one warrant for every two shares of common stock purchased in the offering, with each full warrant having an exercise price of $7.50 per share. Each share of common stock and accompanying warrant were sold at a combined offering price of $5.00, for gross proceeds of approximately $15.25 million, before deducting underwriting discounts and offering expenses. We 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/or warrants to purchase 145,000 shares of common stock at the IPO price, less the underwriting discount. On January 25, 2023, we sold an additional 237,804 shares of common stock and accompanying warrants to purchase up to 145,000 shares of common stock upon the underwriters’ exercise in part of their over-allotment option for additional gross proceeds of approximately $1.1 million, before deducting underwriting discounts and offering expenses. 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. Our shares of common stock began trading on the Nasdaq Capital Market under the ticker symbol “COYA” on December 29, 2022.

### Components of Results of Operations

### Revenue

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

### Operating Expenses

#### Research and Development Expenses

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

- 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 therapeutic modalities, multiple product candidates, and multiple therapeutic areas under development.

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

Until such time as a product candidate has received approval of its IND application, we consider it a preclinical product candidate. Each of our preclinical product candidates is being developed on one of our three therapeutic modalities: (1) Treg-enhancing biologics; (2) Treg-derived exosomes; and (3) autologous Treg cell therapy. The product candidates utilizing our Treg-enhancing biologics are collectively referred to as the “300 Series.” The product candidates utilizing our Treg-derived exosomes are collectively referred to as the “200 Series.” The product candidates utilizing our autologous Treg cell therapy are collectively referred to as the “100 Series.” Currently, our 300 Series product candidates include COYA 301 and COYA 302, our 200 Series product candidates include COYA 201 and COYA 206, and our 100 Series product candidate is COYA 101. For our preclinical candidates we report external development costs and other external research and development costs collectively by Series. These external development costs include: fees paid to CROs, CMOs and research laboratories, process development, manufacturing and clinical development activities. Preclinical research and development activities often benefit more than one preclinical product candidate within a given Series and so disaggregating the data would neither be practicable or meaningful.

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

#### In-Process Research and Development

Research and development costs incurred in obtaining technology licenses are charged to research and development expense if the technology licensed has not reached technological feasibility which includes manufacturing, clinical, intellectual property and/or regulatory success which has no alternative future use. The licenses purchased by 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.

#### Change in Fair Value of Convertible Promissory Notes

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

#### Other Income, Net

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

#### 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 September 30, 2023 and 2022

| Operating expenses: | Three Months Ended September 30, 2023 | 2022 | Change |
| --- | ---: | ---: | ---: |
| Research and development | $1,592,232 | $1,278,289 | $313,943 |
| In-process research and development | - | 135,000 | (135,000) |
| General and administrative | 1,964,990 | 1,236,127 | 728,863 |
| Depreciation | 6,841 | 12,455 | (5,614) |
| Total operating expenses | 3,564,063 | 2,661,871 | 902,192 |
| Loss from operations | (3,564,063) | (2,661,871) | (902,192) |
| Other income: |  |  |  |
| Change in fair value of convertible promissory notes | - | (1,398,375) | 1,398,375 |
| Other income, net | 142,089 | 39,420 | 102,669 |
| Net loss | $(3,421,974) | $(4,020,826) | $598,852 |

#### Research and Development Expenses

Research and development expenses increased by $0.3 million from $1.3 million for the three months ended September 30, 2022 to $1.6 million for the three months ended September 30, 2023. The increase was mainly due to a $0.3 million increase in our preclinical expenses and a $0.1 million increase in internal research and development expenses, partially offset by a decrease of $0.1 decrease attributable to our sponsored research agreement with Houston Methodist Hospital. For our product candidates (COYA 101), we track our external research and development expenses on a candidate-by-candidate basis. For our preclinical product candidates, we track our external research and development expenses in aggregate by Series. External research and development expenses include fees paid to CROs, CMOs and research laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities. We do not further classify or evaluate our internal research and development expenses by product candidate or by Series as these expenses primarily relate to compensation, materials and supplies, and other costs which are deployed across multiple therapeutic modalities, multiple product candidates, and multiple therapeutic areas under development.

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

| External costs: Clinical product candidates: | Three Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| COYA 101 | $- | $14,477 |
| Preclinical product candidates: |  |  |
| COYA 200 Series | 18,186 | 404,926 |
| COYA 300 Series | 894,971 | 180,665 |
| Sponsored research | 108,634 | 254,802 |
| Internal costs: |  |  |
| Internal research and development expenses, including stock-based compensation | 570,441 | 423,419 |
| Total | $1,592,232 | $1,278,289 |

#### In-Process Research and Development

Under the terms of our License Agreement, or ARS License Agreement, with ARScience Biotherapeutics, Inc., or ARS, we paid an option fee of $0.1 million, which was expensed as in-process research and development expense during the three months ended September 30, 2022. We had no such in-process research and development option fees during the three months ended September 30, 2023.

#### General and Administrative Expenses

General and administrative expenses increased by $0.7 million from $1.2 million for the three months ended September 30, 2022 compared to $2.0 million for the three months ended September 30, 2023. The increase was primarily due to a $0.7 million increase due to additional costs associated with being a public company including investor and public relations, director and officer insurance, financial advisory and compliance, as well as an increased headcount.

#### Other income, net

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

#### Comparison of the nine months ended September 30, 2023 and 2022

| Operating expenses: | Nine Months Ended September 30, 2023 | 2022 | Change |
| --- | ---: | ---: | ---: |
| Research and development | $3,891,896 | $3,704,466 | $187,430 |
| In-process research and development | 350,000 | 135,000 | 215,000 |
| General and administrative | 5,456,087 | 3,948,434 | 1,507,653 |
| Depreciation | 20,521 | 20,521 | - |
| Total operating expenses | 9,718,504 | 7,808,421 | 1,910,083 |
| Loss from operations | (9,718,504) | (7,808,421) | (1,910,083) |
| Other income: |  |  |  |
| Change in fair value of convertible promissory notes | - | (1,376,030) | 1,376,030 |
| Other income, net | 464,693 | 47,343 | 417,350 |
| Net loss | $(9,253,811) | $(9,137,108) | $(116,703) |

#### Research and Development Expenses

Research and development expenses increased by $0.2 million from $3.7 million for the nine months ended September 30, 2022 to $3.9 million for the nine months ended September 30, 2023. The increase was due to a $1.3 million increase in our preclinical expenses, and a $0.2 million increase in internal research and development expenses, partially offset by a $1.0 million decrease in costs attributable to our sponsored research agreement with Houston Methodist Hospital, and a $0.3 million decrease in costs for our clinical product candidate.

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

| External costs: Clinical product candidates: | For the Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| COYA 101 | $- | $291,838 |
| Preclinical product candidates: |  |  |
| COYA 200 Series | 25,870 | 808,969 |
| COYA 300 Series | 2,373,664 | 298,010 |
| Sponsored research | 211,038 | 1,242,083 |
| Internal costs: |  |  |
| Internal research and development expenses, including stock-based compensation | 1,281,324 | 1,063,566 |
| Total | $3,891,896 | $3,704,466 |

22

#### In-Process Research and Development

Under the terms of our exclusive License and Supply Agreement, or DRL Agreement, with Dr. Reddy’s Laboratories, or DRL, we paid a license fee of $0.4 million, which was expensed as in-process research and development expense during the nine months ended September 30, 2023. For the nine months ended September 30, 2022, we incurred 0.1 million of in-process research and development license fees.

#### General and Administrative Expenses

General and administrative expenses increased by $1.5 million from $3.9 million for the nine months ended September 30, 2022 compared to $5.5 million for the nine months ended September 30, 2023. The increase was primarily due to $2.4 million in additional costs associated with being a public entity such as increased investor and public relations, director and office insurance, financial advisory and compliance, as well as increased employee headcount, partially offset by $1.0 million of reduced costs attributable to the convertible note financing completed in the second quarter of 2022.

#### Other income, net

Other income, net increased by $0.4 million from the nine months ended September 30, 2022 compared to the nine months ended September 30, 2023. The increase is primarily due to interest and dividend income earned on cash balances received from our IPO.

### Liquidity and Capital Resources

### Overview

Since our inception, we have not recognized any revenue and have incurred operating losses and negative cash flows from our operations. We have not yet commercialized any product and we do not expect to generate revenue from sales of any products for several years, if at all. Since our inception through September 30, 2023 we have funded our operations through the sale of convertible promissory notes, convertible preferred stock, our initial public offering, and the exercise of the underwriter's over-allotment option. We incurred a net loss of $3.4 million and $4.0 million for the three months ended September 30, 2023 and 2022 and $9.3 million and $9.1 million for the nine months ended September 30, 2023 and 2022, respectively, and had an accumulated deficit of $27.1 million as of September 30, 2023. As of September 30, 2023 we had $10.9 million in cash and cash equivalents. We expect our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2024. We have based these estimates on assumptions that may prove to be imprecise, and we could utilize our available capital resources sooner than we expect.

### 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;
- 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:

|  | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Cash used in operating activities | $(8,947,731) | $(5,016,279) |
| Cash used in investing activities | (350,000) | (135,000) |
| Cash provided by financing activities | 14,250,311 | 9,461,949 |
| Net increase in cash and cash equivalents | $4,952,580 | $4,310,670 |

#### Operating Activities

During the nine months ended September 30, 2023, we used $8.9 million of cash in operating activities. Cash used in operating activities reflected our net loss of $9.3 million and a $0.7 million net decrease in our operating assets and liabilities, partially offset by noncash charges of $0.7 million related to stock-based compensation and depreciation, and other charges of $0.4 million related to acquired in-process research and development. The primary use of cash was to fund our operations related to the development of our product candidates.

During the nine months ended September 30, 2022, we used $5.0 million of cash in operating activities. Cash used in operating activities reflected our net loss of $9.1 million, offset by a $1.5 million net increase in our operating assets and liabilities and noncash charges of $1.5 million, which consisted of depreciation, change in fair value of convertible debt, and stock-based compensation, and other charges of $1.1 million related to debt issuance costs and acquired in-process research and development. The primary use of cash was to fund our operations related to the development of our product candidates.

#### Investing Activities

During the nine months ended September 30, 2023, investing activities used $0.4 million of cash for the purchase of in-process research and development relating to the DRL Agreement.

During the nine months ended September 30, 2022, investing activities used $0.1 million of cash for the purchase of in-process research and development.

#### Financing Activities

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

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

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

### Commitments and contingencies, including license and sponsored research agreements

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

The Methodist License Agreement provides that in the event we sublicense products and services covered by the Methodist License Agreement, then royalties owed to Houston Methodist would be computed as a percentage of payments received by us from the sublicensee. In addition, the termination provisions provide that Houston Methodist may only terminate the Methodist License

Agreement, among other things, in the event that after five years we are not “Actively Attempting to Develop or Commercialize,” as such term is defined in the Methodist License Agreement.

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

### 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 $100,000.

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

In addition, we may also owe tiered payments to ARS based on our achievement of certain developmental milestones. Under the ARS License Agreement, we will pay an aggregate of $13.25 million in developmental milestone payments for the first Combination Product (as defined in the ARS License Agreement) in a new indication. We will then pay an aggregate of $11.6 million in developmental milestone payments for each Combination Product in each subsequent new indication. Further, for the first Mono Product (as defined in the ARS License Agreement), we will pay an aggregate of $11.75 million in developmental milestone payments. We will then pay an aggregate of $5.85 million in developmental milestone payments for each Mono Product in each subsequent new indication, and we will owe an aggregate of $5.85 million if all developmental milestones are achieved for each new indication. We will also owe royalties on net sales of licensed products ranging from low to mid-single digit percentages. In the event we sublicense our rights under the ARS License Agreement, we will owe royalties on sublicense income within the range of 10% to 20%. To date, the $100,000 option fee and the mid-six-figure up-front fee (upon exercise of the ARS Option) are the only payments made to ARS under ARS License Agreement.

### 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 $350,000. We will pay to DRL up to an aggregate of approximately $2.9 million of pre-approval regulatory milestone payments for the first indication in the Field (as defined in the DRL Agreement) and an additional approximately $20.0 million if all other development, regulatory approval and sales milestones are incurred under the DRL Agreement. We will also pay to DRL a low-six figure milestone payment per additional indication. Further, pursuant to the DRL Agreement, we will pay to DRL single-digit royalties on Net Sales (as defined in the DRL Agreement).

### 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.

## Controls and procedures

As filed, 2,635 characters.

#### 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 September 30, 2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of September 30, 2023, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

#### 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.

## Risk factors

As filed, 658 characters.

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

Filed Nov 8, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-060718. Last ingested by Listed: Oct 24, 2026, 15:15 ET. No prices; not investment advice.