UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
For the transition period from ______________ to ______________
Commission File Number
(Exact name of registrant as specified in its charter)
|
|
|
|
|
(State or other jurisdiction of
incorporation or organization) |
(IRS Employer
Identification No.) |
(Address of principal executive offices and zip code)
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbols | Name of Each Exchange on Which Registered | ||
|
|
|
The
|
||
|
|
|
The
|
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.
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 (Section 232.405
of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
| Large accelerated filer ☐ | 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
As of November 10, 2025, there were
ESTRELLA IMMUNOPHARMA, INC.
TABLE OF CONTENTS
i
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q (“Form 10-Q”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Forward-looking statements are typically identified by words such as “plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” “continue,” “could,” “may,” “might,” “possible,” “potential,” “predict,” “should,” “would” and other similar words and expressions, but the absence of these words does not mean that a statement is not forward-looking.
The forward-looking statements are based on the current expectations of our management and are inherently subject to uncertainties and changes in circumstances and their potential effects and speak only as of the date such statements are made. These forward-looking statements involve a number of risks, uncertainties or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. These risks and uncertainties include, but are not limited to, those described in “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-KT filed with the SEC on March 25, 2025.
These and other factors could cause actual results to differ from those implied by the forward-looking statements. Forward-looking statements are not guarantees of performance and speak only as of the date hereof. There can be no assurance that future developments will be those that have been anticipated or that we will achieve or realize these plans, intentions, or expectations.
All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
In addition, statements of belief and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date they are made, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely upon these statements.
ii
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
ESTRELLA IMMUNOPHARMA, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| As of | As of | |||||||
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| (Unaudited) | ||||||||
| Current Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalent | $ |
|
$ |
|
||||
| Prepaid expenses and other receivable |
|
|
||||||
| Total current assets |
|
|
||||||
| Other Assets | ||||||||
| Prepaid expenses, related party , non-current |
|
|
||||||
| Total Assets | $ |
|
$ |
|
||||
| Liabilities and Stockholders’ (Deficit) Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable - related party | $ |
|
$ |
|
||||
| Other payables and accrued liabilities |
|
|
||||||
| Accrued liability - related party |
|
|
||||||
| Derivative liabilities |
|
|||||||
| Franchise tax payable |
|
|||||||
| Income tax payables |
|
|||||||
| Total current liabilities |
|
|
||||||
| Total Liabilities |
|
|
||||||
| Commitments and Contingencies (Note 4) | ||||||||
| Preferred Stock | ||||||||
|
|
||||||||
|
Series AA Preferred Stock, $
|
||||||||
| 0 shares issued and outstanding as of September 30, 2025 and December 31, 2024 | ||||||||
| Stockholders’ (Deficit) Equity: | ||||||||
|
Common stock, $
|
||||||||
|
|
|
|
||||||
| Additional paid-in capital |
|
|
||||||
| Accumulated deficit |
(
|
) |
(
|
) | ||||
|
Treasury stock, at cost
|
(
|
) |
(
|
) | ||||
| Total Stockholders’ (Deficit) Equity |
(
|
) |
|
|||||
| Total Liabilities and Stockholders’ (Deficit) Equity | $ |
|
$ |
|
||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
ESTRELLA IMMUNOPHARMA, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| For the Three Months ended | For the Nine Months ended | |||||||||||||||
| September 30 | September 30 | September 30 | September 30 | |||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Operating expenses | ||||||||||||||||
| Research and development | $ |
|
$ |
|
$ |
|
$ |
|
||||||||
| General and administrative |
|
|
|
|
||||||||||||
| Total operating expenses |
|
|
|
|
||||||||||||
| Loss from Operations |
(
|
) |
(
|
) |
(
|
) |
(
|
) | ||||||||
| Loss before income taxes |
(
|
) |
(
|
) |
(
|
) |
(
|
) | ||||||||
| Income taxes provision |
(
|
) |
(
|
) | ||||||||||||
| Net loss | $ |
(
|
) | $ |
(
|
) | $ |
(
|
) | $ |
(
|
) | ||||
| Net loss applicable to common stock per share, basic and diluted | $ |
(
|
) | $ |
(
|
) | $ |
(
|
) | $ |
(
|
) | ||||
| Weighted average common stock outstanding, basic and diluted |
|
|
|
|
||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
ESTRELLA IMMUNOPHARMA, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ (DEFICIT) EQUITY
| Additional |
Total
Stockholders’ |
|||||||||||||||||||||||
| Common Stock | Treasury | Paid-in | Accumulated | (Deficit) | ||||||||||||||||||||
| Shares | Amount | Stock | Capital | Deficit | Equity | |||||||||||||||||||
| Balance, December 31, 2023 |
|
$ |
|
$ | $ |
|
$ |
(
|
) | $ |
|
|||||||||||||
| Net loss | - |
(
|
) |
(
|
) | |||||||||||||||||||
| Issuance of common stock for PIPE investment |
|
|
(
|
) | ||||||||||||||||||||
| Purchase of treasury stock | - |
(
|
) |
(
|
) | |||||||||||||||||||
| Balance, March 31, 2024 (Unaudited) |
|
|
(
|
) |
|
(
|
) |
|
||||||||||||||||
| Net loss | - |
(
|
) |
(
|
) | |||||||||||||||||||
| Purchase of treasury stock | - |
(
|
) |
(
|
) | |||||||||||||||||||
| Balance, June 30, 2024 (Unaudited) |
|
$ |
|
$ |
(
|
) | $ |
|
$ |
(
|
) | $ |
|
|||||||||||
| Net loss | - |
(
|
) |
(
|
) | |||||||||||||||||||
| Purchase of treasury stock | - |
(
|
) |
(
|
) | |||||||||||||||||||
| Balance, September 30, 2024 (Unaudited) |
|
$ |
|
$ |
(
|
) | $ |
|
$ |
(
|
) | $ |
|
|||||||||||
| Balance, December 31, 2024 |
|
$ |
|
$ |
(
|
) | $ |
|
$ |
(
|
) | $ |
|
|||||||||||
| Stock-based compensation | - |
|
|
|||||||||||||||||||||
| Purchase of treasury stock | - |
(
|
) |
(
|
) | |||||||||||||||||||
| Net loss | - |
(
|
) |
(
|
) | |||||||||||||||||||
| Balance, March 31, 2025 (Unaudited) |
|
|
(
|
) |
|
(
|
) |
(
|
) | |||||||||||||||
| Stock-based compensation | - |
|
|
|||||||||||||||||||||
| Issuance of common stock for PIPE investment |
|
|
|
|
||||||||||||||||||||
| Net loss | - |
(
|
) |
(
|
) | |||||||||||||||||||
| Balance, June 30, 2025 (Unaudited) |
|
$ |
|
$ |
(
|
) | $ |
|
$ |
(
|
) | $ |
(
|
) | ||||||||||
| Stock-based compensation | - |
|
|
|||||||||||||||||||||
| Issuance of common stock for PIPE investment |
|
|
|
|
||||||||||||||||||||
| Net loss | - |
(
|
) |
(
|
) | |||||||||||||||||||
| Balance, September 30, 2025 (Unaudited) |
|
$ |
|
$ |
(
|
) | $ |
|
$ |
(
|
) | $ |
(
|
) | ||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
ESTRELLA IMMUNOPHARMA, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Nine Months Ended | ||||||||
| September 30, | September 30, | |||||||
| 2025 | 2024 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ |
(
|
) | $ |
(
|
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock-based compensation |
|
|||||||
| Change in fair value of derivative liabilities |
|
|||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid expenses and other receivable |
|
(
|
) | |||||
| Prepaid expenses - related party |
(
|
) | ||||||
| Accounts payable - related party |
|
(
|
) | |||||
| Other payables and accrued liabilities |
(
|
) |
(
|
) | ||||
| Accrued liability - related party |
|
|
||||||
| Franchise tax payable |
(
|
) |
(
|
) | ||||
| Income tax payables |
(
|
) | ||||||
| Net cash used in operating activities |
(
|
) |
(
|
) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Payments of transactions cost |
(
|
) | ||||||
| Proceeds from issuance of common stock for PIPE investment |
|
|||||||
| Purchase of treasury stock |
(
|
) |
(
|
) | ||||
| Net cash provided by (used in) financing activities |
|
(
|
) | |||||
| Net Change in Cash |
|
(
|
) | |||||
| Cash at beginning of the period |
|
|
||||||
| Cash at end of the period | $ |
|
$ |
|
||||
| Supplemental Cash Flow Information | ||||||||
| Cash paid for income tax | $ |
|
$ |
|
||||
| Cash paid for interest | $ | $ | ||||||
| Supplemental Disclosure of Non-cash Financing Activities | ||||||||
| Recognition of derivative liabilities upon closing of the PIPE investment | $ |
|
$ | |||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
ESTRELLA IMMUNOPHARMA, INC
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1 — Organization and Business Operation
Description of business
Estrella Immunopharma, Inc. (“Estrella”), a Delaware corporation, is a clinical-stage biopharmaceutical company developing T-cell therapies with the capacity to cure patients with blood cancers and solid tumors.
Estrella was incorporated in the State of Delaware
on
On June 28, 2022, pursuant to a Contribution Agreement
between Estrella and Eureka (the “Contribution Agreement”), Eureka contributed certain assets (the “Assets”) related
to T-cell therapies targeting CD19 and CD22, proteins expressed on the surface of almost all B-cell leukemias and lymphomas, in exchange
for
As part of the Separation, Estrella entered into a License Agreement (the “License Agreement”) with Eureka and Eureka Therapeutics (Cayman) Ltd. (“Eureka Cayman”), an affiliate of Eureka, and a Services Agreement (the “Services Agreement”) with Eureka, and Eureka contributed and assigned the Collaboration Agreement between Eureka and Imugene Limited (“Imugene”) (the “Collaboration Agreement”) to Estrella. The License Agreement grants the Company an exclusive license to develop CD19 and CD22 targeted T-cell therapies using Eureka’s ARTEMIS ® platform. Under the Services Agreement, Eureka has agreed to perform certain services for the Company in connection with the development of the Company’s product candidates, EB103 and EB104. EB103, which is a T-cell therapy also called “CD19-Redirected ARTEMIS ® T-Cell Therapy,” utilizes Eureka’s ARTEMIS ® technology to target CD19. The Company is also developing EB104, a T-cell therapy also called “CD19/22 Dual-Targeting ARTEMIS ® T-Cell Therapy.” Like EB103, EB104 utilizes Eureka’s ARTEMIS ® technology to target not only CD19, but also CD22. The Collaboration Agreement establishes the partnership between the Company and Imugene related to development of solid tumor treatments using Imugene’s product candidate (“CF33-CD19t”) in conjunction with EB103.
On March 2, 2023, the FDA cleared Estrella’s IND application for EB103, allowing Estrella to proceed with the Phase I/II STARLIGHT-1 Clinical Trial “STARLIGHT-1”. On March 4, 2024, the Company, Estrella and Eureka executed Statement of Work #001 relating to clinical trial services to be performed by Eureka in connection with the STARLIGHT-1 clinical trial (see Note 5). On May 13, 2024, the Company and Eureka entered into Amendment No. 1 to the Statement of Work, effective as of March 4, 2024 (see Note 5). As of September 30, 2025, the Company is continuing to enroll patients into the STARLIGHT-1 clinical trial in the U.S.
On September 29, 2023 (the “ Closing Date ”), Estrella and TradeUP Acquisition Corp. (“UPTD”) consummated the business combination (the “Business Combination”) pursuant to the terms of the Agreement and Plan of Merger, dated as of September 30, 2022 (the “Merger Agreement”), by and among UPTD, Tradeup Merger Sub Inc., a Delaware corporation and wholly-owned subsidiary of UPTD (“Merger Sub”), and the Company. Pursuant to the terms of the Merger Agreement, Merger Sub merged with and into Estrella, with Estrella surviving as a wholly-owned subsidiary of UPTD. Upon closing of the Business Combination (the “Closing”), UPTD changed its corporate name to Estrella Immunopharma, Inc. (“New Estrella” or the “Company”). Estrella’s fiscal year end was June 30, and the Company’s fiscal year end changed from December 31 to June 30 effective as of the Closing Date.
On June 26, 2024, the Company filed a Certificate of Ownership and Merger with the Delaware Secretary of State to effect a merger (the “Merger 1”) with its wholly-owned subsidiary, Estrella BioPharma Inc, pursuant to Section 253 of the Delaware General Corporation Law. The Merger 1 was approved by resolutions duly adopted by the unanimous written consent of the Company’s board of directors. The Merger 1 became effective at 11:59 PM Eastern Time on June 30, 2024, at which time the separate existence of Estrella ceased, and the Company became the surviving corporation.
In November 2024, the Company established Estrella Immunopharma (Hong Kong) Co. Ltd (“Estrella HK”) as a wholly-owned subsidiary in Hong Kong. This subsidiary was created to facilitate strategic collaborations and provide a local presence to support the Company’s operations and initiatives in Asia. As of September 30, 2025, Estrella HK had not commenced any operations.
On November 25, 2024, the Board of Directors of the Company (the “Board”) approved a change in the fiscal year end of the Company from June 30 to December 31.
5
Liquidity and Going Concern
The accompanying unaudited condensed consolidated financial statements
have been prepared on a basis which contemplates the realization of assets and the satisfaction of liabilities in the normal course of
business. As of September 30, 2025, the Company had cash of approximately $
On April 20, 2023, UPTD entered into the Common
Stock Purchase Agreement and the White Lion RRA with White Lion. Subsequently, on April 26, 2023, UPTD and White Lion entered into an
amendment to the Common Stock Purchase Agreement. Pursuant to the Common Stock Purchase Agreement, following the Closing, New Estrella
will have the right, but not the obligation, to require White Lion to purchase, from time to time up to $
On March 4, 2024, Estrella and Eureka entered
into Statement of Work No. 001 (“SOW”) relating to the clinical trial services to be performed by Eureka in connection with
STARLIGHT-1, the Phase I/II clinical trial of Estrella’s product candidate, EB103, a T-cell therapy targeting CD19 using ARTEMIS
®
T cell technology licensed by Estrella from Eureka. Pursuant to the SOW, Estrella agrees to pay Eureka non-refundable net fees in connection
with the achievement of certain milestones set forth in the SOW, with total fees of $
On May 13, 2024, the Company and Eureka entered into Amendment No. 1 to the Statement of Work, effective as of March 4, 2024, to clarify that in the event that Estrella exercises its right to terminate or suspend the engagement with Eureka by providing written notice to Eureka in accordance with the SOW, Estrella will only be obligated to compensate Eureka for (i) services provided by Eureka pursuant to the SOW (“Services”) in connection with milestones that were achieved prior to the date and time of such written notice, (ii) reasonable and documented pass-through costs incurred by Eureka on behalf of Estrella prior to the date and time of such written notice in connection with providing the Services and (iii) amounts payable to third parties pursuant to commitments reasonably entered into by Eureka on behalf of Estrella prior to the date and time of such written notice in connection with providing the Services, provided that Eureka shall make commercially reasonable efforts to cancel or reduce any such amounts.
From May 2025 to September 2025, the Company entered
into securities purchase agreements (the “Securities Purchase Agreement”) with certain investors (the “Purchasers”).
As of September 30, 2025, the Company had issued
The Company’s future operations are highly dependent on a combination of factors, including but not necessarily limited to (1) the success of our research and development programs; (2) the timely and successful completion of any additional financing; (3) the development of competitive therapies by other biotechnology and pharmaceutical companies; (4) our ability to manage growth of the organization; (5) our ability to protect our technology and products; and, ultimately (6) regulatory approval and successful commercialization and market acceptance of our product candidates.
However, management believes that the Company has sufficient funds on hand and ability to raise funds in the future through the issuance and sale of Equity Line Shares to White Lion in order to meet its working capital requirements and debt obligations, for at least the next 12 months from the filing date of these unaudited condensed consolidated financial statements.
6
Note 2 — Significant accounting policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X under the Securities Act. Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and accompanying notes, included in the Company’s Transition Report Form 10-KT, filed with the SEC on March 25, 2025. The condensed consolidated Balance Sheet as of December 31, 2024 presented in this Form 10-Q has been derived from the audited Balance Sheet filed in the aforementioned Form 10-KT. The interim results for the three and nine months ended September 30, 2025 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2025 or for any future interim periods.
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. Any intercompany transactions and balances have been eliminated in consolidation.
Emerging Growth Company Status
The Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act of 1933, as amended, (the “Securities Act”), as modified by the Jumpstart The Company’s Business Startups Act of 2012, (the “JOBS Act”), and it may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging growth companies but any such an election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. This may make comparison of the Company’s unaudited condensed consolidated financial statements with another public company difficult because of the potential differences in accounting standards used.
The Company became an emerging growth company upon the consummation of its initial public offering on July 19, 2021. Accordingly, the Company will remain an emerging growth company until the last day of the fiscal year in which the fifth anniversary of its initial public offering occurs, December 31, 2026, unless other criteria are met sooner.
Use of Estimates
The preparation of the unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.
7
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates. Significant items subject to such estimates and assumptions include stock-based compensation, derivative liability, and deferred income tax asset valuation and allowances.
Cash and cash equivalent
The Company maintains its operating accounts in a single financial institution. The balance is insured by the United States Federal Deposit Insurance Corporation (“FDIC”) but only up to specified limits. The Company’s cash is maintained in a checking account. Cash equivalents consist of funds held at the third-party broker’s account for stock repurchase purpose, and the funds are unrestricted and immediately available for withdrawal and use. The balance held at the third-party broker’s account is insured by the United States Securities Investor Protection Corporation (“SIPC”) but only up to specified limits.
Prepaid expenses and other receivable
Prepaid expenses and other receivable primarily include prepayments for third party services, such as professional fees, insurance premium, and others.
Basic and Diluted Loss per Common Stock
Basic net loss per Common Stock is calculated by dividing the net loss by the weighted–average number of Common Stock outstanding for the period. Diluted net loss per share is computed by dividing the net loss by the weighted–average number of Common Stock and dilutive share equivalents outstanding for the period, determined using the treasury stock and if–converted methods. Since the Company has had net losses for all periods presented, all potentially dilutive securities are anti–dilutive.
As of September 30, 2025 and December 31, 2024, the Company had the following potential Common Stock outstanding which were not included in the calculation of diluted net loss per Common Stock because inclusion thereof would be anti-dilutive:
| As of | As of | |||||||
| September 30, | December 31, | |||||||
| 2025 | 2024 | |||||||
| (Unaudited) | ||||||||
| Public warrant |
|
|
||||||
Stock-Based Compensation
The Company recognizes compensation costs resulting from the issuance of stock-based awards to employees, non-employees and directors as an expense in the statements of operations over the requisite service period based on a measurement of fair value for each stock-based award. The fair value of each option granted is estimated as of the date of grant using the Black-Scholes-Merton option-pricing model, net of actual forfeitures. The fair value is amortized as compensation cost on a straight-line basis over the requisite service period of the awards, which is generally the vesting period. The Black-Scholes-Merton option-pricing model includes various assumptions, including the fair market value of the Common Stock of the Company, expected life of stock options, the expected volatility and the expected risk-free interest rate, among others. These assumptions reflect the Company’s best estimates, but they involve inherent uncertainties based on market conditions generally outside the control of the Company.
As a result, if other assumptions had been used, stock-based compensation expense, as determined in accordance with authoritative guidance, could have been materially impacted. Furthermore, if the Company uses different assumptions on future grants, stock-based compensation expense could be materially affected in future periods.
8
Warrants
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of equity at the time of issuance. The Company determined that upon further review of the warrant agreements, the Company concluded that its warrants qualify for equity accounting treatment.
Upon completion of the business combination, all of UPTD’s public warrants that remained outstanding were replaced by the Company’s public warrants. The Company treated such warrants replacement as a warrant modification and no incremental fair value was recognized.
Concentration of Credit Risk
Financial instruments that potentially subject
the Company to concentration of credit risk consist of one cash account in a financial institution located in the United States. The Company
has not experienced losses on these accounts, and management believes the Company is not exposed to significant risks. The Federal Deposit
Insurance Corporation (FDIC) provides standard insurance coverage of $
The Securities Investor Protection Corporation
(SIPC) provides standard insurance coverage of $
Risks and Uncertainties
Management continues to evaluate the impact of inflation rates, the continuing military action in Ukraine, and Israel’s war against Hamas on the industry and has concluded that these factors could have a negative effect on the Company’s financial position and/or results of its operations. The specific impact of these factors is not readily determinable as of the date of these unaudited condensed consolidated financial statements. The unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
The Company’s future success depends on the Company and Eureka’s ability to retain key employees, directors, and advisors and to attract, retain and motivate qualified personnel. The Company relies on Eureka to provide certain technical assistance to facilitate the Company’s exploitation of the intellectual property licensed by Eureka, and Eureka will be solely responsible for the manufacture and supply of clinical quantities of the licensed products and final filled and finished (including packaged) drug product form of the licensed products. Pursuant to the Services Agreement, Eureka currently performs or supports the Company’s important research and development activities. The Statement of Work (see Note 5) may be terminated by mutual agreement at any time. Following the termination of, or the expiration of the term of, the Statement of Work, the Company may not be able to replace the research and development-related services that Eureka provides or enter into appropriate third-party arrangements on terms and conditions, including cost, comparable to those that the Company will receive from Eureka. Additionally, after the Statement of Work terminates, the Company may be unable to sustain the research and development-related services at the same levels or obtain the same benefits as when the Company was receiving such services and benefits from Eureka. If the Company is required to operate these research and development functions separately in the future, or are unable to obtain them from other providers, the Company may not be able to operate the Company’s business effectively and could result in a material adverse effect.
9
Fair Value of Financial Instruments
The fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurements and Disclosures,” approximates the carrying amounts represented in the accompanying unaudited condensed consolidated balance sheet, primarily due to their short-term nature. The Company measures the fair value of certain of its financial assets and liabilities on a recurring basis. A fair value hierarchy is used to rank the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value which is not equivalent to cost will be classified and disclosed in one of the following three categories:
Level 1 — Quoted prices (unadjusted) in active markets for identical assets and liabilities.
Level 2 — Inputs other than Level 1 that are observable, either directly or indirectly, such as unadjusted quoted prices for similar assets and liabilities, unadjusted quoted prices in the markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The following table sets forth by level within the fair value hierarchy our financial asset and liability that were accounted for at fair value on a recurring basis as of September 30, 2025:
|
Carrying
Value at September 30, |
Fair Value Measurement at September 30, 2025 | |||||||||||||||
| 2025 | Level 1 | Level 2 | Level 3 | |||||||||||||
| Derivative liabilities (True-Up Shares) | $ |
|
$ | $ | $ |
|
||||||||||
The following is a reconciliation of the beginning and ending balance of the financial liability measured at fair value on a recurring basis for the nine months ended September 30, 2025:
|
Derivative
Liabilities |
||||
| Initial fair value of derivative liabilities attributable to True-Up shares feature embedded in the Private Placement | $ |
|
||
| Change in fair value of derivative liabilities |
|
|||
| Ending balance as of September 30, 2025 | $ |
|
||
Derivative Liabilities
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including the True Up Shares in connection with the Securities Purchase Agreements entered during May 2025 to September 2025 (refer to Note 7), to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC 815, Derivatives and Hedging (“ASC 815”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period.
The True Up Shares embedded within Securities Purchase Agreement do not qualify as equity under ASC 815; therefore, the True Up Shares are required to be bifurcated and classified as a liability and measured at fair value with subsequent changes in fair value recorded in the consolidated statements of operations.
Income Taxes
The Company recognizes deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards and establishes a valuation allowance when it is more likely than not that all or a portion of deferred tax assets will not be realized.
10
Accounting for uncertainty in income taxes is recognized based on a recognition threshold and measurement process for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. There were unrecognized tax benefits and no amounts accrued for interest and penalties as of September 30, 2025 and December 31, 2024. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company may be subject to potential examination by federal and state taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months.
On July 4, 2025, H.R.1, also referred to as the One Big Beautiful Bill Act (OBBBA), was signed into law in the U.S. The OBBBA includes changes to U.S. federal tax law, including extending and modifying certain key Tax Cuts and Jobs Act of 2017 provision, and provisions allowing accelerated tax deductions for qualified property and research expenditures. The Company is currently evaluating the impact on its consolidated financial statements.
The Company is incorporated in the State of Delaware and is required to pay franchise taxes to the State of Delaware on an annual basis.
Research and Development Expenses
The Company charges research and development costs to operations as incurred. The Company accrues costs incurred by external service providers, including contract research organizations and clinical investigators, based on its estimates of service performed and costs incurred. These estimates include the level of services performed by third parties, patient enrollment in clinical trials when applicable, administrative costs incurred by third parties, and other indicators of the services completed. Based on the timing of amounts invoiced by service providers, the Company may also record payments made to those providers as prepaid expenses that will be recognized as expense in future periods as the related services are rendered. Research and development expenses for the nine months ended September 30, 2025 and 2024 primarily consisted of personnel costs for the design and development of clinical trials, legal and professional fees, and facilities related fees. Refer to Note 5 for the terms of the License Agreement, the Service Agreement, and the Statement of Work.
Lease
Effective July 1, 2022, the Company adopted ASU 2016-02, “Leases” (Topic 842), and elected the practical expedients that does not require us to reassess: (1) whether any expired or existing contracts are, or contain, leases, (2) lease classification for any expired or existing leases and (3) initial direct costs for any expired or existing leases. For lease terms of twelve months or fewer, a lessee is permitted to make an accounting policy election not to recognize lease assets and liabilities.
If any of the following criteria are met, the Company classifies the lease as a finance lease:
| ● | The lease transfers ownership of the underlying asset to the lessee by the end of the lease term; |
| ● | The lease grants the lessee an option to purchase the underlying asset that the Company is reasonably certain to exercise; |
| ● | The lease term is for a major part of the remaining economic life of the underlying asset; |
| ● | The present value of the sum of the lease payments and any residual value guaranteed by the lessee, that is not otherwise included in the lease payments substantially exceeds all of the fair value of the underlying asset; or |
| ● | The underlying asset is of such a specialized nature that it is expected to have no alternative use to the lessor at the end of the lease term. |
11
Leases that do not meet any of the above criteria are accounted for as operating leases.
The Company combines lease and non-lease components in its contracts under Topic 842, when permissible.
Operating lease right-of-use (“ROU”) asset and lease liability were recognized based on the present value of lease payments over the lease term. Since the implicit rate for the Company’s leases is not readily determinable, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow, on a collateralized basis, an amount equal to the lease payments, in a similar economic environment and over a similar term.
In the event of lease modification, the Company followed ASC 842-10-25 through 25-12, “lessee accounting for a modification that is not accounted for as a separate contract,” to remeasure and reallocate the remaining consideration in the lease agreement and reassess the classification of the lease at the effective date of the modification.
The Company reviews the impairment of its ROU asset consistent with the approach applied for its other long-lived assets. The Company reviews the recoverability of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on its ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations. The Company has elected to include the carrying amount of operating lease liability in any tested asset group and includes the associated operating lease payments in the undiscounted future pre-tax cash flows.
Segment reporting
The chief executive officer is identified as the
Company’s chief operating decision-maker who reviews financial information presented on a consolidated basis, accompanied by disaggregated
information about revenues by different revenues streams for purposes of allocating resources and evaluating financial performance. Based
on qualitative and quantitative criteria established by Accounting Standards Codification (“ASC”) 280, “Segment Reporting”,
the Company considers itself to be operating within
Recent Accounting Pronouncements
The Company considers the applicability and impact of all accounting standards updates (“ASUs”). Management periodically reviews new accounting standards that are issued. Under the Jumpstart Our Business Startups Act of 2012, as amended (the “JOBS Act”), the Company meets the definition of an emerging growth company and has elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.
In October 2023, the FASB issued ASU 2023-06, Disclosure Improvements — codification amendments in response to SEC’s disclosure Update and Simplification initiative which amend the disclosure or presentation requirements of codification subtopic 230-10 Statement of Cash Flows—Overall, 250-10 Accounting Changes and Error Corrections— Overall, 260-10 Earnings Per Share— Overall, 270-10 Interim Reporting— Overall, 440-10 Commitments—Overall, 470-10 Debt—Overall, 505-10 Equity—Overall, 815-10 Derivatives and Hedging—Overall, 860-30 Transfers and Servicing—Secured Borrowing and Collateral, 932-235 Extractive Activities— Oil and Gas—Notes to Financial Statements, 946-20 Financial Services— Investment Companies— Investment Company Activities, and 974-10 Real Estate—Real Estate Investment Trusts—Overall. The amendments represent changes to clarify or improve disclosure and presentation requirements of above subtopics. Many of the amendments allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the SEC’s requirements. Also, the amendments align the requirements in the Codification with the SEC’s regulations. For entities subject to existing SEC disclosure requirements or those that must provide financial statements to the SEC for securities purposes without contractual transfer restrictions, the effective date aligns with the date when the SEC removes the related disclosure from Regulation S-X or Regulation S-K. Early adoption is not allowed. For all other entities, the amendments will be effective two years later from the date of the SEC’s removal. The Company is currently evaluating the impact of the update on the Company’s unaudited condensed consolidated financial statements and related disclosures.
12
In December 2023, the FASB issued ASU 2023-09, which is an update to Topic 740, Income Taxes. The amendment in this update enhances the transparency and decision usefulness of income tax disclosures. ASU 2023-09 will be effective for fiscal years beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments in this Update should be applied on a prospective basis. Retrospective application is permitted. The Company is currently evaluating the impact the adoption of ASU 2023-09 will have on its annual and interim disclosures.
On November 4, 2024, the FASB issued ASU No. 2024-03, Expense Disaggregation Disclosures ( “ ASU 2024-03 ” ). ASU 2024-03 amends ASC 220, Comprehensive Income to expand income statement expense disclosures and require disclosure in the notes to the financial statements of specified information about certain costs and expenses. ASU 2024-03 is required to be adopted for fiscal years commencing after December 15, 2026, with early adoption permitted. The Company is currently evaluating the impact of adopting the standard on its financial position and results of operations.
On July 5, 2025, the FASB issued ASU No. 2025-05, Financial Instruments — Credit Losses (“ASU 2025-05”). ASU 2025-05 amends ASC 326-20, the calculation of credit loss allowances estimates the uncollectible portion of short-term receivables and contract assets, using historical and current data without forecasting future conditions, and may include post-balance-sheet collections if eligible. The guidance will be effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted in both interim and annual reporting periods in which financial statements have not yet been issued or made available for issuance. The Company is currently evaluating the impact of adopting the standard on its financial position and results of operations.
The Company does not believe recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the Company’s unaudited condensed consolidated financial statements.
Note 3 — Other payables and accrued liabilities
|
As of
September 30, 2025 |
As of
December 31, 2024 |
|||||||
| (Unaudited) | ||||||||
| Accrued professional fees (i) | $ |
|
$ |
|
||||
| Salary and payroll taxes payable |
|
|
||||||
| Others |
|
|||||||
| Total other payables and accrued liabilities | $ |
|
$ |
|
||||
| (i) |
|
Note 4 — Commitments and contingencies
Manufacturing Commitment
On June 28, 2022, Eureka and the Company entered into the License Agreement under which Eureka granted to the Company a license under certain intellectual property controlled by Eureka for exploitation by the Company in the Company’s territory under the License Agreement (the “Licensed Territory”). Eureka will be solely responsible for the manufacture and supply of clinical quantities of the licensed products and final filled and finished (including packaged) drug product form of the licensed products for development and commercialization purposes in the field both in the Licensed Territory and elsewhere. Refer to Note 5.
Equity Financing Commitment
On April 20, 2023, UPTD entered into a Common
Stock purchase agreement (as amended on April 26, 2023 and from time to time, the “Common Stock Purchase Agreement”) and a
related registration rights agreement (the “White Lion RRA”) with White Lion. Pursuant to the Common Stock Purchase Agreement,
following the Closing, the Company has the right, but not the obligation to require White Lion to purchase, from time to time, up to $
13
On December 5, 2024, the Company entered into
Amendment No. 2 (the “Amendment”) to the Common Stock Purchase Agreement dated April 20, 2023, as previously amended on April
26, 2023 (the “Purchase Agreement”), with White Lion. pursuant to which the Company may sell and issue up to $
The Amendment extends the term of the Purchase Agreement from December 30, 2024 to December 30, 2025. Additionally, the Amendment adds a new “Rapid Purchase” mechanism allowing for expedited settlement of share purchases compared to the standard purchase process under the original agreement. Under this new mechanism, the Company may deliver Rapid Purchase Notices to White Lion by 11:00 a.m. New York time on any business day when the Company’s common stock is not trading on an over-the-counter market, with concurrent delivery of the subject shares via DWAC to White Lion’s brokerage account. The purchase price for Rapid Purchases will be the lowest traded price of the Company’s common stock on the Rapid Purchase Notice date, with White Lion required to wire payment by 5:00 p.m. New York time on the following business day.
For Rapid Purchases, the maximum number of shares
the Company can require White Lion to purchase is limited to the lesser of (i)
Registration Rights
In connection with the Securities Purchase Agreements entered into with the Selling Stockholders on or about May 30, 2025 and June 1, 2025 , the Company agreed to file a registration statement (of which this prospectus is a part) to register the resale of the Shares of Common Stock purchased by the Selling Stockholders. The Company also agreed to register the resale of any additional shares of Common Stock, or “True-Up Securities,” that may be issuable pursuant to the true-up mechanism in such agreements. The Company agreed to cause such registration statement to be declared effective within a reasonable period of time after the filing thereof.
Contingencies
From time to time, the Company is or may be party to certain legal proceedings, as well as certain asserted and un-asserted claims. Amounts accrued, as well as the total amount of reasonably possible losses with respect to such matters, individually and in the aggregate, are not deemed to be material to the Company’s unaudited condensed consolidated financial statements.
In some instances, the Company may be required to indemnify its licensors for the costs associated with any such adversarial proceedings or litigation. Third parties may assert infringement claims against the Company, its licensors or its strategic collaborators based on existing patents or patents that may be granted in the future, regardless of their merit. There is a risk that third parties may choose to engage in litigation or other adversarial proceedings with the Company, its licensors or its strategic collaborators to enforce or otherwise assert their patent rights.
Note 5 — Related Party Transactions
License Agreement
On June 28, 2022, in connection with the Contribution Agreement, Eureka, Eureka Cayman and Estrella entered a License Agreement under which Eureka and Eureka Cayman granted to Estrella a license under certain intellectual property controlled by Eureka for exploitation by Estrella in the Licensed Territory, which primarily includes the United States and the rest of the world, excluding China and the Association of Southeast Asian Nations.
14
Pursuant to the License Agreement, (1) Eureka will be solely responsible for the manufacture and supply of clinical quantities of the licensed products and final filled and finished (including packaged) drug product form of the licensed products (“Drug Product”) for development and commercialization purposes in the field both in the Licensed Territory and elsewhere, and (2) during the term of the License Agreement, Eureka will manufacture and supply, either itself or through an affiliate or a third party contract manufacturer, all of Estrella’s and its related parties’ clinical quantities requirements of Drug Product for Estrella’s and its related parties’ development activities with respect to the licensed products in the field in the Territory conducted in accordance with this agreement. Eureka and Estrella will use good faith efforts to negotiate and enter into a clinical supply agreement on reasonable and customary terms for the supply of Drug Product by Eureka to Estrella at a price equal to the fully burdened cost (the “Clinical Supply Agreement”), and a related quality agreement, which agreements will govern the terms and conditions of the manufacturing and clinical supply of Drug Product to Estrella. Furthermore, Eureka and Estrella’s collaboration will be overseen by a JSC. Eureka and Estrella will initially appoint one representative to the JSC, with each representative having knowledge and expertise in the development and commercialization of products similar to the licensed products and having sufficient seniority within the applicable party to provide meaningful input and make decisions arising within the scope of the JSC’s responsibility.
The License Agreement requires Estrella to make
certain payments, including (a) an “upfront” payment of $
As of September 30, 2025 and December 31, 2024,
Estrella had no remaining balance of accounts payable – related party, related to the upfront payment under the License Agreement.
As of September 30, 2025, two development milestones related to the IND submission of EB103 to the FDA (“Milestone 1”) and
first patient dosed in the first clinical trial of a licensed product (“Milestone 2”) was earned by Eureka under the Agreement.
Milestone payment related to Milestone 1 was paid on October 10, 2023. Milestone payment of $
Services Agreement
On June 28, 2022, Estrella entered a Services
Agreement with Eureka. Pursuant to the Services Agreement, Eureka will perform certain services for Estrella related the transfer of certain
technology and the provision of certain technical assistance to facilitate Estrella’s exploitation of the intellectual property
licensed by Eureka to Estrella under the License Agreement, and Eureka will perform such services for Estrella (the “Services”).
Under the Services Agreement, Estrella shall pay Eureka (1) $
Eureka’s services commenced on June 28, 2022. As of both September 30, 2025 and December 31, 2024, Estrella had no accounts payable balance – related party related to the Service Agreement with Eureka.
For the three and nine months ended September 30, 2025 and 2024, Estrella did not incur any pass-through costs related to clinical trials under this Service Agreement.
After the closing of the business combination
on September 29, 2023, on October 10, 2023 Estrella remitted approximately $
Statement of Work
On March 4, 2024, the Company, Estrella and Eureka entered into Statement of Work No. 001 (“SOW”) relating to the clinical trial services to be performed by Eureka in connection with STARLIGHT-1, the Phase I/II clinical trial of Estrella’s product candidate, EB103, a T-cell therapy targeting CD19 using ARTEMIS ® T cell technology licensed by Estrella from Eureka. The trial is designed to assess the safety, tolerability, recommended Phase II dose, and preliminary anti-cancer activity of EB103 for the treatment of relapsed or refractory (R/R) B-cell non-Hodgkin lymphoma (NHL) patients.
15
The SOW is governed by the terms of the Services Agreement, dated June 28, 2022, between Estrella and Eureka (as amended by Amendment No. 1, effective as of October 1, 2022, and Amendment No. 2, effective as of March 1, 2023), and incorporates all the terms of the Services Agreement by reference. Notwithstanding the foregoing, the terms and conditions of the SOW govern in the event of any conflict with the terms and conditions of the Services Agreement.
The scope of work set forth in the SOW includes study start-up, patient dosings and related activities, study close-out, and reporting. Additionally, the SOW sets forth the various services Eureka will provide in connection with the clinical trial, including regulatory document development, site activation, patient enrollment and consent management, data collection, and pharmacovigilance.
Pursuant to the SOW, Estrella agrees to pay Eureka
non-refundable net fees in connection with the achievement of certain milestones set forth in the SOW, with total fees of $
The first invoice payable to Eureka issuable upon
execution of the SOW is for $
Additional invoices will be issued in connection
with the patient dosing milestone, amounting to approximately $
As of September 30, 2025, the Company has paid
$
As of September 30, 2025 and December 31, 2024,
nine and two patients had been dosed, respectively. The second clinical trial site was activated as of September 30, 2025. The Company
accrued approximately $
On May 13, 2024, the Company and Eureka entered into Amendment No. 1 to the SOW, effective as of March 4, 2024, to clarify that in the event that Estrella exercises its right to terminate or suspend the engagement with Eureka by providing written notice to Eureka in accordance with the SOW, Estrella will only be obligated to compensate Eureka for (i) services provided by Eureka pursuant to the SOW (“Services”) in connection with milestones that were achieved prior to the date and time of such written notice, (ii) reasonable and documented pass-through costs incurred by Eureka on behalf of Estrella prior to the date and time of such written notice in connection with providing the Services and (iii) amounts payable to third parties pursuant to commitments reasonably entered into by Eureka on behalf of Estrella prior to the date and time of such written notice in connection with providing the Services, provided that Eureka shall make commercially reasonable efforts to cancel or reduce any such amounts.
16
Consulting Agreement
On November 1, 2024, the Company entered into a consulting agreement (the “Consulting Agreement”) with CoFame Investment Holding LLC (“CoFame”), a related party, as CoFame’s manager, Hong Zhang, is a director of the Company. Pursuant to the Consulting Agreement, CoFame provides advisory and consulting services to the Company regarding activities in Asia, including investor relations and potential business collaborations, as mutually agreed upon from time to time.
As of September 30, 2025, and December 31, 2024,
the Company has accrued $
Series AA Preferred Stock
On June 28, 2022, Estrella and Eureka entered
into the Contribution Agreement pursuant to which Eureka agreed to contribute and assign to Estrella all rights, title and interest in
and to the Assets in exchange for
Lease
On October 1, 2023, Estrella entered into an office
sublease agreement with Eureka, to lease
On July 1, 2024, the Company entered into a new office sublease agreement
with Eureka. Pursuant to the Sublease Agreement, the sublease commenced on July 1, 2024 and expired on
On January 1, 2025, the Company entered into another
sublease agreement with Eureka for the same location. Under the new sublease agreement, the sublease commenced on January 1, 2025, and
expired on
On July 1, 2025, the Company entered into a new
office sublease agreement with Eureka. Pursuant to the Sublease Agreement, the sublease commenced on July 1, 2025 and expires on
Estrella elected not to apply the ROU and lease
liability recognition requirements to above mentioned short-term lease as the modified lease term was less than twelve months. As a result
of the lease amendment, Estrella then reduced the corresponding ROU and lease liability to $
For the three months ended September 30, 2025
and 2024, the Company incurred $
As of September 30, 2025 and December 31, 2024,
the outstanding balance of lease payments of $
17
Note 6 — Preferred Stock
Series AA Preferred Stock
On June 28, 2022, Estrella and Eureka entered
into the Contribution Agreement pursuant to which Eureka contributed and assigned to Estrella all right, title and interest in and to
the Assets in exchange for
Series A Preferred Stock
On June 28, 2022, Estrella entered into a Series
A Preferred Stock Purchase Agreement with an accredited third-party investor to raise gross proceeds of $
On each of July 31, 2023 and September 18, 2023,
an aggregate of six third party investors executed joinders to Estrella’s Series A Preferred Stock Purchase Agreement. Pursuant
to the joinders, such investors agreed to purchase an aggregate of
The significant terms of the Series A, Series AA Preferred Stocks issued by Estrella are as follows:
Dividend Rights
Each holder of Preferred Stock shall be entitled
to receive only when, as and if declared by the board of directors, out of any funds and assets legally available therefor, dividends
on a pari passu basis at the rate of
Liquidation Rights
Series A Preferred Stock – In the event of any voluntary or involuntary liquidation, dissolution or winding up of Estrella, the holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of Estrella available for distribution to its stockholders or, in the case of a Deemed Liquidation Event (as defined below), out of the consideration payable to stockholders in such Deemed Liquidation Event or the Available Proceeds, before any payment shall be made to the holders of Series AA Preferred Stock or Common Stock by reason of their ownership thereof, and amount per share equal to the applicable Original Issue Price, plus any dividends declared but unpaid thereon.
Series AA Preferred Stock – After payment of the full liquidation preference of the Series A Preferred Stock, then in the event of any voluntary or involuntary liquidation, dissolution or winding up of Estrella, the holders of shares of Series AA Preferred Stock then outstanding shall be entitled to be paid out of the assets of Estrella available for distribution to its stockholders or, in the case of a Deemed Liquidation Event, out of the consideration payable to stockholders in such Deemed Liquidation Event or the Available Proceeds. Before any payment shall be made to the holders of Common Stock by reason of their ownership, an amount per share equal to the applicable Original Issue Price, plus any dividends declared but unpaid thereon.
Distribution of Remaining Assets – If there are any remaining assets of Estrella, such assets shall be distributed among the holders of the shares of Series A Preferred Stock and Common Stock, prorated based on the number of shares held by each such holder, treating for this purpose all such securities as if they had been converted to Common Stock.
18
Voting Rights
Each holder of outstanding shares of Series A
Preferred Stock shall be entitled to cast
Conversion Rights
Each share of Preferred Stock shall be convertible,
at the option of the holder at any time and from time to time, and without the payment of additional consideration by the holder into
such number of fully paid and non – assessable shares of Common Stock as is determined by dividing the Original Issue Price by the
Conversion Price in effect at the time of conversion. The Series A Conversion Price applicable to the Series A Preferred Stock shall initially
be equal to $
Pursuant to the Estrella’s amended and restated
certificate of incorporation, holders of the Estrella’s Preferred Stock have the following methods of conversion: Automatic conversion
upon either (a) the closing of the sale of shares of Common Stock to the public at a price of at least $
Redemption Rights
Both Series A Preferred Stock and Series AA Preferred Stock were mandatorily redeemable upon the occurrence of a “Deemed Liquidation Event” which includes the following: (1) a merger or consolidation in which (a) Estrella is a constituent party or (b) a subsidiary of Estrella is a constituent party and Estrella issues shares of its capital stock pursuant to such merger or consolidation, except any such merger or consolidation involving the Corporation or a subsidiary in which the shares of capital stock of Estrella outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of (i) the surviving or resulting corporation; or (ii) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation; or (2) (a) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by Estrella or any subsidiary of Estrella of all or substantially all the assets of Estrella and its subsidiaries taken as a whole, or (b) the sale or disposition (whether by merger, consolidation or otherwise, and whether in a single transaction or a series of related transactions) of one or more subsidiaries of Estrella if substantially all of the assets of Estrella and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of Estrella.
Estrella shall use the consideration received by Estrella for such Deemed Liquidation Events mentioned above (net of any retained liabilities associated with the assets sold or technology licensed, as determined in good faith by the board of directors of Estrella) , together with any other assets of Estrella available for distribution to its stockholders, all to the extent permitted by Delaware law governing distributions to stockholders (the “Available Proceeds”), to redeem all outstanding shares of Preferred Stock at a price per share equal to the applicable liquidation amount, which is equal to the original issue price of the Preferred Stock plus any declared but unpaid dividends. The Series A Preferred Stock must receive its liquidation amount prior to the Series AA Preferred Stock receives any payment.
19
The Series A Preferred Stock and the Series AA Preferred Stock were accounted for under Section 480-10-S99 — Distinguishing Liabilities from Equity (FASB Accounting Standards Codification 480) as amended by ASU 2009-04 — for Redeemable Equity Instruments (“ASU 2009-04”). Under ASU 2009-04, a redeemable equity security is to be classified as temporary equity if it is conditionally redeemable upon the occurrence of an event that is not solely within the control of the issuer.
Immediately prior to the consummation of the business
combination on September 29, 2023, all shares of Estrella Series A and Series AA Preferred Stock were converted into Estrella Common Stock
and each share of Estrella Common Stock was exchanged for shares of Common Stock at an exchange ratio of
Note 7 — Stockholders’ Equity (Deficit)
The Company’s authorized shares of Common
Stock is
PIPE investment shares
In connection with the Merger, on September 14,
2023, UPTD entered into subscription agreements (the “Subscription Agreements”) with each of Plentiful Limited, a Samoan limited
company (“Plentiful Limited”) and Lianhe World Limited (“Lianhe World,” together with Plentiful Limited, collectively,
the “PIPE Investors”). Concurrently with the closing of the Business Combination, the Company issued
Within thirty days following the date of the Closing,
each PIPE Investor will also be entitled to receive
On January 22, 2024, the Company completed the
issuance of an additional
Stock purchase agreement shares
On April 20, 2023, UPTD entered into the Common
Stock Purchase Agreement and the White Lion RRA with White Lion. Subsequently, on April 26, 2023, UPTD and White Lion entered into an
amendment to the Common Stock Purchase Agreement. Pursuant to the Common Stock Purchase Agreement, following the Closing, the Company
will have the right, but not the obligation, to require White Lion to purchase, from time to time up to $
From May 2025 to September 2025, the Company entered
into Securities Purchase Agreements with three accredited investors. Each Securities Purchase Agreement includes a contingent value protection
feature pursuant to which the Company may be required to issue additional shares of Common Stock (the “True-Up Shares”) if
the market price of the Company’s stock on the 12-month anniversary of the agreement is below $
20
The True-Up feature was determined to require
bifurcation from the host equity contract and is accounted for separately as a derivative liability under ASC 815. The derivative liability
is initially measured at fair value on the issuance date and is remeasured at fair value at each subsequent reporting date, with changes
in fair value recognized as General and administrative expense in the consolidated statements of operations. In accordance with the Securities
Purchase Agreements executed between May 2025 to September 2025, the maximum number of True-Up Shares totals to
Changes in fair value recognized for the three and nine months ended
September 30, 2025, were $
As of September 30, 2025, the fair values of the
derivative liabilities related to the True-Up Shares were valued at $
Warrants
In connection with the reverse recapitalization,
the Company has assumed
Each whole Warrant entitles the registered holder
to purchase
The Company has agreed that as soon as practicable,
but in no event later than
Once the Warrants become exercisable, the Company may call the Warrants for redemption:
| ● | in whole and not in part; |
| ● |
at a price of $
|
| ● |
upon not less than 30 days’ prior written notice of redemption (the “
|
| ● |
if, and only if, the reported last sale price of the Common Stock equals or exceeds $
|
21
The Company accounted for the
Stock Repurchase Program
On January 30, 2024, the Company issued a press
release announcing that its board of directors has authorized share repurchases of up to $
As of September 30, 2025 and December 31, 2024,
the Company has repurchased
Note 8 — Stock Based Compensation
At the special meeting of UPTD stockholders related
to the Business Combination held on July 31, 2023, UPTD’s shareholders approved the adoption of the Company’s 2023 Omnibus
Incentive Plan (the “2023 Plan”), which became effective on the Closing Date. Upon the closing of the Business Combination,
The stock-based compensation expense recorded
in the Company’s results of operations. For the three months ended September 30, 2025 and 2024 were $
The breakdown of stock-based compensation by categories for the three and nine months ended September 30, 2025 and 2024 are summarized below:
|
For the
Three months ended September 30, 2025 |
For the
September 30,
|
|||||||
| (Unaudited) | (Unaudited) | |||||||
| Research and development | $ |
|
$ | |||||
| General and administrative |
|
|||||||
| Total stock-based compensation | $ |
|
$ | |||||
|
For the
Nine months ended September 30, 2025 |
For the
September 30,
|
|||||||
| (Unaudited) | (Unaudited) | |||||||
| Research and development | $ |
|
$ | |||||
| General and administrative |
|
|||||||
| Total stock-based compensation | $ |
|
$ | |||||
22
The fair value of the granted options under 2023
plan was $
A summary of information related to stock option activities during the six-month transition period ended December 31, 2024 and for the nine months ended September 30, 2025 is as follows:
|
Number of
Shares |
Weighted-
Average Grant Date Fair Value per share |
|||||||
| Balance of unvested early-exercised stock options at June 30, 2024 | $ | |||||||
| Granted- 2023 Plan stock option |
|
$ |
|
|||||
| Vested 2023 Plan stock option |
(
|
) | $ |
|
||||
| Balance of unvested stock options at December 31, 2024 |
|
$ | ||||||
| Vested 2023 Plan stock option |
(
|
) | $ |
|
||||
| Balance of unvested stock options at September 30, 2025 (Unaudited) |
|
$ |
|
|||||
Note 9 — Leases
On October 1, 2023 Estrella entered into an office lease contract with Eureka, a related party (“Lease 1”) for nine months without any renewal option.
On July 1, 2024, the Company entered into an office sublease agreement with Eureka (“Lease 2”) for six months without any renewal option.
On January 1, 2025, the Company entered into an office sublease agreement with Eureka (“Lease 3”) for six months without any renewal option.
On July 1, 2025, the Company entered into an office sublease agreement with Eureka (“Lease 4”) for six months without any renewal option.
The Company’s office lease was classified as an operating lease. The Company’s lease agreement does not contain any material residual value guarantees or material restrictive covenants.
The Company elected not to apply the ROU and lease liability recognition requirements to above mentioned short-term lease in accordance with ASC 842-20-25-2, and continued to recognize the lease monthly payments in profit or loss on a straight–line basis over the remaining lease term period.
Rent expense for the three months ended September
30, 2025 and 2024 was $
23
Note 10 — Segment Information
|
For the three months ended
September 30, |
||||||||
| 2025 | 2024 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Operating expenses: | ||||||||
| Clinical trial related service fee | $ |
|
$ |
|
||||
| Consulting fee |
|
|
||||||
| Stock-based compensation |
|
|||||||
| Salary expense |
|
|
||||||
| Professional fee |
|
|
||||||
| Insurance expense |
|
|
||||||
| Other general and administrative fee |
|
|
||||||
| Loss before income tax |
|
|
||||||
| Income tax expense | ||||||||
| Net loss | $ |
|
$ |
|
||||
|
For the nine months ended
September 30, |
||||||||
| 2025 | 2024 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Operating expenses: | ||||||||
| Clinical trial related service fee | $ |
|
$ |
|
||||
| Consulting fee |
|
|
||||||
| Stock-based compensation |
|
|||||||
| Salary expense |
|
|
||||||
| Professional fee |
|
|
||||||
| Insurance expense |
|
|
||||||
| Other general and administrative fee |
|
|
||||||
| Loss before income tax |
|
|
||||||
| Income tax expense |
|
|
||||||
| Net loss | $ |
|
$ |
|
||||
Note 11 — Subsequent Events
Advancement of Clinical Program
In November, 2025, the Company announced the completion of Phase I dosing for the STARLIGHT-1 clinical trial.
Issuance of Additional Shares
Pursuant to the Subscription Agreements dated
September 14, 2023 with Plentiful Limited and Lianhe World Limited (collectively, the “PIPE Investors”), each PIPE Investor
was entitled to receive additional shares of the Company’s common stock if the volume-weighted average price (“VWAP”)
of the Company’s common stock for the fifteen (15) trading days prior to September 29, 2025 was less than $
24
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
On March 2, 2023, the FDA cleared the IND application for EB103, allowing Estrella to proceed with the Phase I/II STARLIGHT-1 Clinical Trial.
On March 4, 2024, Estrella and Eureka entered into Statement of Work No. 001 (“SOW”) relating to the clinical trial services to be performed by Eureka in connection with STARLIGHT-1, the Phase I/II clinical trial of Estrella’s product candidate, EB103, a T-cell therapy targeting CD19 using ARTEMIS ® T cell technology licensed by Estrella from Eureka. Pursuant to the SOW, Estrella agrees to pay Eureka non-refundable net fees in connection with the achievement of certain milestones set forth in the SOW, with total fees of $33.0 million for achievement of all milestones. The clinical trial has been initiated and nine patients have been dosed as of September 30, 2025, and we have accrued approximately $12.9 million in accrued liabilities – related party, for the corresponding dosing milestones. As of September 30, 2025, Estrella has paid $3.5 million to Eureka for covering the fees associated with the study initiation milestones that have been achieved.
To date, Estrella has funded its operations primarily from the June 28, 2022 issuance of $5.0 million of our Series A Preferred Stock, net proceeds of approximately $20.1 million raised from completion of the Business Combination on September 29, 2023, and net proceed of approximately $2.3 million raised from various stock purchase agreements entered from May 2025 to September 2025. We have a limited operating history. Since our inception, our operations have focused on preparing for the Business Combination, regulatory filings (including the INDs), planning preclinical and clinical studies, conducting the clinical trial, and building our management team. We do not have any product candidates approved for sale and have not generated any revenue from product sales.
As of September 30, 2025, we had an accumulated deficit of approximately $36.4 million. We have remitted payment of approximately $11.2 million to Eureka, for the upfront payment incurred under the License Agreement and for services provided by Eureka under the Services Agreement on October 10, 2023. In addition, in March 2024, we have paid $3.5 million to Eureka for covering the fees associated with the milestones achieved under SOW#001. In June 2024, we made a deposit of $1.5 million towards patient treatment expenses, which will be applied to the final invoice, with the unused portion of this deposit to be refunded once all expenses are fully settled.
We anticipate that our expenses will increase significantly in connection with our ongoing activities, as we:
| ● | continue to advance preclinical and clinical development of our product candidates and preclinical programs; |
| ● | seek regulatory approval for any product candidates that successfully complete clinical trials; |
| ● | scale up our clinical and regulatory capabilities; |
| ● | adapt our regulatory compliance efforts to incorporate requirements applicable to marketed products; |
| ● | maintain, expand, and protect our intellectual property portfolio; |
| ● | add 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 and other expenses in operating as a public company. |
25
Recent Developments
The Business Combination and Public Company Costs
On September 29, 2023, we consummated the previously announced Business Combination with UPTD pursuant to the terms of the Merger Agreement by and among UPTD, Merger Sub and Estrella. No closing conditions set forth in the Merger Agreement were waived by either UPTD or Estrella. Moreover, concurrently with closing of the Merger, Estrella consummated the following transactions: (i) sales of 9.25 million shares of Estrella Series A Preferred Stock for $9.25 million ($730,000 of which was comprised of funds in the trust account delivered to the Company at the closing of the Business Combination that would have otherwise been paid to US Tiger Securities, Inc as a deferred underwriting fee in connection with UPTD’s initial public offering), which shares were converted to shares of Estrella Common Stock and subsequently exchanged for Merger Consideration Shares of UPTD immediately prior to the effective time of the merger at an exchange ratio of 0.2407, with such shares becoming shares of New Estrella Common Stock from and after the effective time of the Merger; (ii) issuance of 500,000 shares of Estrella’s Series A Preferred Stock to White Lion for $500,000 and 250,000 shares of Estrella Series A Preferred Stock to White Lion in consideration for its commitments under the Common Stock Purchase Agreement, dated April 20, 2023, between UPTD and White Lion and in accordance with the Joinder to the Series A Preferred Stock Purchase Agreement between Estrella and White Lion, dated April 20, 2023, which shares were subsequently converted to shares of Estrella Common Stock and exchanged for Merger Consideration Shares of UPTD at an exchange ratio of 0.2407, with such Merger Consideration Shares becoming shares of New Estrella Common Stock from and after the effective time of the Merger and (iii) issued an unsecured promissory note to a third party for $300,000 at 12% interest per annum, which will be payable 30 days after the closing date of the Merger of September 29, 2023 and subsequently settled on October 26, 2023.
While the legal acquirer in the Business Combination was UPTD, for financial accounting and reporting purposes under U.S. GAAP, Estrella was the accounting acquirer, and the Business Combination was accounted for as a “reverse recapitalization.” A reverse recapitalization (i.e., a capital transaction involving the issuance of stock by UPTD for the stock of Estrella) does not result in a new basis of accounting, and the consolidated financial statements of the combined company represent the continuation of the consolidated financial statements of Estrella in many respects. Accordingly, the consolidated assets, liabilities and results of operations of Estrella became the historical consolidated financial statements of the combined company, and UPTD’s assets, liabilities, and results of operations were consolidated with Estrella beginning on the Closing Date. Operations prior to the Business Combination are presented as those of Estrella. The net assets of UPTD are recognized at historical cost (which is expected to be consistent with carrying value), with no goodwill or other intangible assets recorded upon execution of the Business Combination.
As a consequence of the Merger, Estrella became the successor to an SEC-registered and Nasdaq-listed company which will require Estrella to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. Estrella expects to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees and additional internal and external accounting and legal and administrative resources, including increased audit and legal fees.
Estrella’s future results of consolidated operations and financial position may not be comparable to historical results as a result of the Business Combination.
On June 26, 2024, the Company filed a Certificate of Ownership and Merger with the Delaware Secretary of State to effect a merger (the “Merger 1”) with its wholly-owned subsidiary, Estrella, pursuant to Section 253 of the Delaware General Corporation Law. The Merger 1 was approved by resolutions duly adopted by the unanimous written consent of the Company’s board of directors. The Merger 1 became effective at 11:59 PM Eastern Time on June 30, 2024, at which time the separate existence of Estrella ceased, and the Company became the surviving corporation.
On November 25, 2024, our Board of Directors approved a change to our fiscal year end from June 30 to December 31.
On November 27, 2024, the Company established a wholly owned subsidiary in Hong Kong.
Results of Operations
Estrella was formed on March 30, 2022, and has not commenced revenue-producing operations. To date, our operations have consisted of the development and early-stage testing of our initial product candidates, EB103 and EB104, preparation and submission of the IND Application for and researching the use of EB103 in conjunction with CF33-CD19t, and the conduct of the STARLIGHT-1 clinical trial.
26
Results of Operations for the three months ended September 30, 2025 and 2024 (unaudited)
There are two major expenses incurred for the operation:
Research and Development Expenses
Research and development expenses consist primarily of costs related to conducting work related to the conduct of the STARLIGHT-1 clinical trial, which was mainly performed by Eureka. For the three months ended September 30, 2025 and 2024, we incurred approximately $4.2 million and $2.8 million of research and development expenses, respectively. All research and development expense incurred for the periods presented above were dedicated to the development of ARTEMIS ® T-cell therapies targeting CD19 and CD22. The increase in research and development expenses was mainly due to Estrella incurring higher service fees during the clinical phase and the completion of three patient dosings, under the SOW for the three months ended September 30, 2025 compared to two patient dosed during the same period in 2024.
Our breakdown of research and development expenses by categories for the three months ended September 30, 2025 and 2024 are summarized below:
|
For the
September 30,
|
For the
three months Ended September 30, 2024 |
|||||||
| (Unaudited) | (Unaudited) | |||||||
| Consulting and laboratory related fee | $ | 4,142,228 | $ | 2,826,000 | ||||
| Stock based compensation | 10,414 | - | ||||||
| Total research and development | $ | 4,152,642 | $ | 2,826,000 | ||||
General and administrative expense
For the three months ended September 30, 2025, and 2024, we incurred approximately $649,000 and $551,000 in general and administrative expenses, respectively. The increase was mainly due to increase of stock-based compensation expenses during the three months ended September 30, 2025 for stock options granted in October 2024, under the 2023 Omnibus Incentive Plan (the “2023 Plan”).
Net Loss
We incurred a net loss of approximately $4.8 million and $3.4 million for the three months ended September 30, 2025 and 2024, respectively. We expect our research and development expenses to continue to increase as we continue to work with Eureka to advance the IND filings, preclinical and clinical development of our product candidates and preclinical programs, seek regulatory approval for any product candidates that successfully complete clinical trials, scale up our clinical and regulatory capabilities, adapt our regulatory compliance efforts to incorporate requirements applicable to marketed products, maintain, expand, and protect our intellectual property portfolio, add 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, and other expenses in operating as a public company.
Results of Operations for the nine months ended September 30, 2025 and 2024 (unaudited)
There are two major expenses incurred for the operation:
Research and Development Expenses
Research and development expenses consist primarily of costs related to conducting work related to the conduct of the STARLIGHT-1 clinical trial, which was mainly performed by Eureka. For the nine months ended September 30, 2025 and 2024, we incurred approximately $10.2 million and $6.4 million of research and development expenses, respectively. All research and development expense incurred for the periods presented above were dedicated to the development of ARTEMIS ® T-cell therapies targeting CD19 and CD22. The increase in research and development expenses was mainly due to Estrella incurring higher service fees during the clinical phase and the completion of seven patient dosings, and one site activation under the SOW for the nine months ended September 30, 2025 compared to two patients dosed during the same period in 2024. In addition, for the nine months ended September 30, 2024, we have incurred $3.5 million R&D expense from Eureka for achieving the milestones related to SOW.
27
Our breakdown of research and development expenses by categories for the nine months ended September 30, 2025 and 2024 are summarized below:
|
For the
September 30,
|
For the
nine months Ended September 30, 2024 |
|||||||
| (Unaudited) | (Unaudited) | |||||||
| Consulting and laboratory related fee | $ | 10,192,228 | $ | 6,376,000 | ||||
| Stock based compensation | 30,903 | - | ||||||
| Total research and development | $ | 10,223,131 | $ | 6,376,000 | ||||
General and administrative expense
For the nine months ended September 30, 2025, and 2024, we incurred approximately $2.2 million and $1.4 million in general and administrative expenses, respectively. The increase was mainly due to professional fees and stock-based compensation expenses during the nine months ended September 30, 2025 for stock options granted in October 2024, under the 2023 Omnibus Incentive Plan (the “2023 Plan”).
Net Loss
We incurred a net loss of approximately $12.5 million and $7.8 million for the nine months ended September 30, 2025 and 2024, respectively. We expect our research and development expenses to continue to increase as we continue to work with Eureka to advance the IND filings, preclinical and clinical development of our product candidates and preclinical programs, seek regulatory approval for any product candidates that successfully complete clinical trials, scale up our clinical and regulatory capabilities, adapt our regulatory compliance efforts to incorporate requirements applicable to marketed products, maintain, expand, and protect our intellectual property portfolio, add 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, and other expenses in operating as a public company.
Liquidity and Capital Resources
As of September 30, 2025, we had cash of approximately $1.6 million and working capital deficit of approximately $11.3 million. Our ability to fund our operations is dependent on the amount of cash on hand, our ability to raise debt or additional equity financing, and ultimately our ability to generate sufficient revenue. We have expended substantial funds on research and development, have experienced losses and negative cash flows from operations since our inception, and expect losses and negative cash flows from operations to continue until such time that our product candidates receive regulatory approval and we generate sufficient revenue and positive cash flow from operations, if ever.
To date, we have not generated any revenue from any source, and we do not expect to generate revenue for at least the next few years. If we fail to complete the development of our product candidates in a timely manner or fail to obtain their regulatory approval, our ability to generate future revenue will be adversely affected. We do not know when, or if, we will generate any revenue from our product candidates, and we do not expect to generate revenue unless and until we obtain regulatory approval of, and commercialize, our product candidates.
28
We expect our expenses to increase significantly in connection with our ongoing activities, particularly as we continue research and development, and seek marketing approval for our product candidates. In addition, if we obtain approval for any of our product candidates, we expect to incur significant commercialization expenses related to sales, marketing, manufacturing, and distribution.
On March 4, 2024, the Company and Eureka entered into Statement of Work No. 001 (“Original SOW”) relating to the clinical trial services to be performed by Eureka in connection with STARLIGHT-1, the Phase I/II clinical trial of Estrella’s product candidate, EB103, a T-cell therapy targeting CD19 using ARTEMIS ® T cell technology licensed by Estrella from Eureka. Pursuant to the SOW, Estrella agreed to pay Eureka non-refundable net fees in connection with the achievement of certain milestones set forth in the SOW, with total fees of $33.0 million for achievement of all milestones.
On May 13, 2024, the Company and Eureka entered into Amendment No. 1 to the SOW, effective as of March 4, 2024 (together with the Original SOW, the “SOW”) to clarify that in the event that Estrella exercises its right to terminate or suspend the engagement with Eureka by providing written notice to Eureka in accordance with the SOW, Estrella will only be obligated to compensate Eureka for (i) services provided by Eureka pursuant to the SOW (“Services”) in connection with milestones that were achieved prior to the date and time of such written notice, (ii) reasonable and documented pass-through costs incurred by Eureka on behalf of Estrella prior to the date and time of such written notice in connection with providing the Services and (iii) amounts payable to third parties pursuant to commitments reasonably entered into by Eureka on behalf of Estrella prior to the date and time of such written notice in connection with providing the Services, provided that Eureka shall make commercially reasonable efforts to cancel or reduce any such amounts.
As of September 30, 2025, the Company had expensed approximately $16.4 million to Eureka for covering the fees associated with the milestones achieved. In addition, we deposited $1.5 million with Eureka for patient treatment expenses, which will be applied to the final invoice, with any unused portion refunded once all fees are settled.
Our future operations are highly dependent on a combination of factors, including but not necessarily limited to (1) the success of our research and development programs; (2) the timely and successful completion of any additional financing; (3) the development of competitive therapies by other biotechnology and pharmaceutical companies; (4) our ability to manage growth of the organization; (5) our ability to protect our technology and products; and, ultimately (6) regulatory approval and successful commercialization and market acceptance of our product candidates.
In addition, even though we may obtain additional funds through the exercise of outstanding tradeable warrants, there is no assurance that any tradeable warrant holders will exercise their warrants, especially any warrants that are currently out of the money. As of November 5, 2025, the closing price of our common stock was $2.56 per share, which is significantly lower than the exercise price of the tradeable warrants of $11.50 per share. Therefore, it is unlikely that the tradeable warrant holders will exercise their warrants unless the market price of our Common Stock increases substantially above the exercise price. The cash proceeds associated with the exercise of the Warrants are dependent on the stock price and the number of Warrants being exercised. We cannot predict when or if any Warrants will be exercised, and it is possible that none or only a small number of Warrants will ever be exercised. Therefore, we may not be able to rely on the warrant exercise as a source of liquidity or capital resources.
Furthermore, although the Common Stock Purchase Agreement with White Lion (“Equity Line Agreement”) provides that the Company may, in its discretion, from time to time, direct White Lion to purchase shares of up to $50.0 million of Common Stock (“Equity Line Shares”) from the Company in one or more purchases in accordance with the Common Stock Purchase Agreement, the Company is not permitted to issue any Equity Line Shares under the Common Stock Purchase Agreement without obtaining majority stockholder approval if such issuance would equal 20% or more of the Company’s outstanding common stock, which had not been obtained as of the date hereof and may not be obtained in the future. On December 28, 2023, the Company’s registration statement on Form S-1 related to the Equity Line Shares was declared effective. As of September 30, 2025, 70,000 Equity Line Shares have been issued to White Lion under the Equity Line Agreement for an aggregate consideration of $79,491.
29
From May 2025 to September 2025, we entered into securities purchase agreements (the “Securities Purchase Agreement”) with certain investors (the “Purchasers”). As of September 30, 2025, we have received gross proceeds of approximately $2.4 million.
We plan to raise additional capital in the future in order to continue our research and development programs and fund operations. However, our ability to raise additional capital in the equity or debt markets is dependent on various factors, and there is no assurance that such financing will be available on acceptable terms, or at all. The market demand of our equity is subject to a number of risks and uncertainties, including but not limited to, negative economic conditions, adverse market conditions, and adverse financial results.
Cash Flows
Operating activities
Net cash used in operating activities was approximately $1.6 million for the nine months ended September 30, 2025, and was primarily attributable to (a) a net loss of approximately $12.5 million, and (b) approximately $0.1 million decrease in other payables and accrued liabilities primarily due to the settlement of various previously accrued expenses, offset by (i) approximately $10.1 million increase in accrued liability – related party as additional service charges were incurred from Eureka following the completion of seven patients dosing and an additional site activation milestone, (ii) approximately $0.5 million increase in non-cash item of stock-based Compensation under the 2023 Plan, and approximately $67,000 loss from change in fair value of derivative liabilities and (iii) approximately $0.3 million decrease in prepaid expenses and other receivable primarily due to the utilization of previously recorded prepaid expenses during the nine months ended September 30, 2025.
Net cash used in operating activities was approximately $6.7 million for the nine months ended September 30, 2024, and was primarily attributable to (a) a net loss of approximately $7.8 million, (b) approximately $0.1 million decrease in other payables and accrued liabilities as we paid off accrued professional fee over the previous period, (c) approximately $1.5 million prepaid expense to Eureka for patient treatment expenses, which will be applied to the final invoice, with any unused portion refunded once all fees are settled, offset by approximately $2.7 million increase in accrued liability – related party as additional service charges were incurred from Eureka.
Financing activities
Net cash provided by financing activities were approximately $2.3 million for the nine months ended September 30, 2025, and was primarily attributable to approximately $2.4 million gross proceed received from Private Placement, payment of approximately $53,000 transaction cost related to Private Placement, and approximately $29,000 payment in stock repurchase.
Net cash used in financing activities were approximately $0.5 million for the nine months ended September 30, 2024, and was primarily attributable to stock repurchase.
Off-Balance Sheet Arrangements
As of September 30, 2025 and December 31, 2024, we did not have, nor do we currently have, any off-balance sheet arrangements as defined under the rules and regulations of the SEC.
Commitments & Contingencies
In the normal course of business, we are subject to loss contingencies, such as legal proceedings and claims arising out of our business, that cover a wide range of matters, including, among others, government investigations and tax matters. In accordance with ASC No. 450-20, “Loss Contingencies”, we will record accruals for such loss contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated.
30
License Agreement
Pursuant to the License Agreement, we were obligated to make and may be required to make, as applicable, (i) a one-time, non-refundable, non-creditable payment of $1.0 million, payable in twelve equal monthly installments, (ii) certain one-time, non-refundable, non-creditable development “milestone” payments upon the occurrence of certain events related to development and sales, with potential aggregate multi-million dollar payments upon FDA approval, and (iii) royalty payments of a single digit percentage on net sales during any consecutive 12-month period.
As of September 30, 2025, we have fully paid the $1.0 million license fee to Eureka.
As of September 30, 2025, two development milestones related to the IND submission of EB103 to the FDA (“Milestone 1”) and first patient dosed in the first clinical trial of a licensed product (“Milestone 2”) have been earned by Eureka under the Agreement. The $50,000 milestone payment related to Milestone 1 was paid on October 10, 2023. The $50,000 milestone payment related to Milestone 2 was paid on September 3, 2024.
No other development milestones, except those mentioned above, sales milestone, or royalty payment has been earned as we do not have any product candidates approved for sale and have not generated any revenue from product sales.
Services Agreement
Pursuant to the Services Agreement, we agreed to (i) pay Eureka $10.0 million in connection with the services thereunder payable in 12 equal monthly installments and (ii) reimburse Eureka on a monthly basis for reasonable pass-through costs incurred or paid to providers by Eureka in providing the services. In addition, we will be charged for other services performed by Eureka outside the scope of the services set forth in the Services Agreement, at a flat rate, by time or materials or as mutually agreed upon the parties in writing. For the nine months ended September 30, 2025, there was $0 in pass-through cost for services provided pursuant to the Services Agreement.
Statement of Work
Pursuant to the SOW, Estrella agreed to pay Eureka total fees of $33.0 million in connection with the Phase I/II clinical trial of Estrella’s product candidate, EB103, a T-cell therapy targeting CD19 using ARTEMIS ® T cell technology licensed by Estrella from Eureka. As of September 30, 2025, we had paid $3.5 million to Eureka for covering the fees associated with milestones achieved, and deposited $1.5 million for patient treatment expenses, which will be applied to the final invoice, with any unused portion refunded once all fees are settled.
Nine patients’ dosing and a second site activation milestones have been completed as of September 30, 2025, and the Company has accrued approximately $12.9 million in accrued liabilities - related party, for the corresponding milestones as of September 30, 2025.
Equity Financing Commitment
On April 20, 2023, UPTD entered into a Common Stock purchase agreement (as amended on April 26, 2023 and from time to time, the “Common Stock Purchase Agreement”) and a related registration rights agreement (the “White Lion RRA”) with White Lion. Pursuant to the Common Stock Purchase Agreement, following the Closing, the Company has the right, but not the obligation to require White Lion to purchase, from time to time up to $50.0 million in aggregate gross purchase price of newly issued shares of Common Stock of the Company, subject to certain limitations and conditions set forth in the Common Stock Purchase Agreement, including, among others, the initial and any subsequent registration statement for the Equity Line Shares being declared effective by the SEC and remaining effective during the term of the Common Stock Purchase Agreement. In addition, under Nasdaq listing rules, the Company is not permitted to issue any Equity Line Shares under the Common Stock Purchase Agreement if such issuance would equal 20% or more of the Company’s outstanding common stock without obtaining majority approval by our stockholders, which had not been obtained as of the date hereof. On December 28, 2023, the Company’s registration statement on Form S-1 related to the Equity Line Shares was declared effective by the SEC. As of September 30, 2025, 70,000 Equity Line Shares have been issued to White Lion pursuant to the Common Stock Purchase Agreement for an aggregate consideration of $79,491.
31
Critical Accounting Policies and Estimates
Our financial statements accompanying notes have been prepared in accordance with U.S. GAAP. The preparation of these financial statements and accompanying notes requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We have identified certain accounting estimates that are significant to the preparation of our financial statements. These estimates are important for an understanding of our financial condition and results of operation. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. We believe no critical accounting estimate was identified other than below listed significant estimate and accounting policies.
Derivative Liabilities
We evaluate all of its financial instruments, including the True Up Shares in connection with the Securities Purchase Agreement, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives, pursuant to ASC 480 and FASB ASC 815, Derivatives and Hedging (“ASC 815”). The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is reassessed at the end of each reporting period.
As of September 30, 2025, the fair value of the derivative liability related to the True-Up Shares was valued at $385,355 using a Monte Carlo Simulation model. Key inputs included volatility of 87% to 90%, a risk-free rate of 3.7% to 3.8%, and a spot price of $1.15 per share. The model captured the path-dependent payoff structure of the True-Up obligation and incorporated the terms of the contingent settlement feature, including the $0.99 to $1.08 True-Up Price and the Contractual Floor Price of $0.20 per share.
Stock-Based Compensation
We recognize compensation costs resulting from the issuance of stock-based awards to employees, non-employees, and directors as an expense in the consolidated statements of operations over the requisite service period based on a measurement of fair value for each stock-based award. The fair value of each option granted is estimated as of the date of grant using the Black-Scholes-Merton option-pricing model, net of actual forfeitures. The fair value is amortized as compensation cost on a straight-line basis over the requisite service period of the awards, which is generally the vesting period. The Black-Scholes-Merton option-pricing model includes various assumptions, including the fair market value of Estrella Common Stock, expected life of stock options, the expected volatility, and the expected risk-free interest rate, among others. These assumptions reflect our best estimates, but they involve inherent uncertainties based on market conditions generally outside of our control.
As a result, if other assumptions had been used, stock-based compensation expense, as determined in accordance with authoritative guidance, could have been materially impacted. Furthermore, if we use different assumptions on future grants, stock-based compensation expense could be materially affected in future periods.
We account for the fair value of equity instruments issued to non-employees using either the fair value of the services received or the fair value of the equity instrument, whichever is considered more reliable . We utilize the Black-Scholes-Merton option-pricing model to measure the fair value of options issued to non-employees.
We record compensation expense for the awards with graded vesting using the straight-line method. We recognize compensation expense over the requisite service period applicable to each individual award, which generally equals the vesting term. Forfeitures are recognized when realized.
32
Emerging Growth Company and Smaller Reporting Company Status
In April 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We previously elected the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards until they would apply to private companies.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information otherwise required under this item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our disclosure controls and procedures are designed to ensure that the information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission (“SEC”) rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
As required by Rules 13a-15 and 15d-15 under the Exchange Act, our management, with the participation and supervision of our Chief Executive Officer and our Chief Financial Officer, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of such date, our disclosure controls and procedures were not, in design and operation, effective as of September 30, 2025 at a reasonable assurance level due to the material weakness in internal control over financial reporting described below:
Material Weaknesses
A material weakness is a deficiency, or a combination of deficiencies, within the meaning of Public Company Accounting Oversight Board Auditing Standard AS 2201, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We had the following material weakness:
| ● | We did not have qualified full-time personnel with appropriate levels of accounting knowledge and experience to address complex U.S. GAAP accounting issues and to prepare and review financial statements and related disclosures under U.S. GAAP. |
In light of this material weakness, we performed additional analysis as deemed necessary to ensure that our financial statements were prepared in accordance with U.S. GAAP. Accordingly, management believes that the financial statements included in this Quarterly Report on Form 10-Q present fairly in all material respects our financial position, results of operations and cash flows for the period presented.
33
Changes in Internal Control over Financial Reporting
The Company has implemented certain changes in its internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) to remediate the material weaknesses identified in fiscal year ended June 30, 2023. The implementation of the material aspects of this plan took place during 2024. These remediation efforts included:
| ● | Adding qualified personnel with appropriate levels of accounting knowledge and experience to address U.S. GAAP accounting issues and prepare and review financial statements and related disclosures |
| ● | Implementing processes whereby non-routine transactions are analyzed by in-house staff and third-party consultants to ensure proper accounting treatment |
| ● | Establishing narratives and policies for business processes that relate to financial statements to ensure proper segregation of duties and internal controls |
While the Company has remediated certain previously identified material weaknesses, our Chief Executive Officer and Chief Financial Officer concluded that as of September 30, 2025, our disclosure controls and procedures were not effective at the reasonable assurance level.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
34
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 1A. RISK FACTORS
Factors that could cause our actual results to differ materially from those included in this Quarterly Report are any of the risks described under “ Risk Factors ” in our Annual Report on Form 10-KT filed with the SEC on March 25, 2025. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. As of the date of this Quarterly Report, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-KT filed with the SEC on March 25, 2025.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On September 26, 2025, pursuant to Securities Purchase Agreements dated September 22, 2025, the Company completed a private placement of 700,000 shares of its Common Stock for aggregate gross proceeds of $1,050,000. The shares were sold to two investors at a purchase price of $1.50 per share. No underwriting discounts or commissions were paid.
The offer and sale of these shares were made in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and/or Rule 506(b) of Regulation D promulgated thereunder. The Company made this determination based on representations from the purchasers, including that they were accredited investors and acquired the securities for investment purposes .
Pursuant to the Securities Purchase Agreements, the purchasers are entitled to a contingent right to receive additional shares of Common Stock (“True-Up Shares”) on a one-time basis if, on the twelve-month anniversary of the closing, the closing price of the Common Stock is less than the $1.50 Per Share Purchase Price . The number of True-Up Shares, if any, will be calculated based on a formula using a “True-Up Price,” which was $1.08 for these transactions. Based on this formula, the investors are contingently eligible to receive up to an aggregate of 272,221 True-Up Shares in connection with these sales, subject to certain limitations, including a 19.99% issuance cap on the total offering unless stockholder approval is obtained.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
During the quarter ended September
30, 2025, no director or officer
35
ITEM 6. EXHIBITS
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
| * | Filed herewith. |
| ** | These certifications are furnished to the SEC pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing. |
36
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.
| ESTRELLA IMMUNOPHARMA, INC. | ||
| By: | /s/ Cheng Liu | |
| Name: | Cheng Liu | |
| Title: | Chief Executive Officer | |
Pursuant to the requirements of the Securities Act of 1933, as amended, this Quarterly Report has been signed below by the following persons in the capacities and on the dates indicated.
| Signature | Position | Date | |||
| /s/ Cheng Liu | Principal Executive Officer and Chairman | November 12, 2025 | |||
| Cheng Liu | (Principal Executive Officer) | ||||
| /s/ Peter Xu | Principal Financial Officer | November 12, 2025 | |||
| Peter Xu | (Principal Financial Officer and Principal Accounting Officer) | ||||
| /s/ Hong Zhang | Chairperson and Director | November 12, 2025 | |||
| Hong Zhang | |||||
| /s/ Marsha Roberts | Director | November 12, 2025 | |||
| Marsha Roberts | |||||
| /s/ Fan Wu | Director | November 12, 2025 | |||
| Fan Wu | |||||
| /s/ Janelle Wu | Director | November 12, 2025 | |||
| Janelle Wu | |||||
| /s/ Pei Xu | Director | November 12, 2025 | |||
| Pei Xu | |||||
| /s/ Dengyao Jia | Director | November 12, 2025 | |||
| Dengyao Jia | |||||
37