Estrella Immunopharma, Inc.: Form 10-Q for the period ended Mar 31, 2026

Estrella Immunopharma, Inc. is a clinical-stage biopharmaceutical company developing T-cell therapies with the capacity to potentially cure patients with blood cancers and solid tumors. Our operations have focused on the development and clinical testing of our lead product candidates, EB103 and EB104, and on the conduct of the STARLIGHT-1 Phase I/II clinical trial.

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 Therapeutics, Inc. (“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. Pursuant to the SOW, Estrella agrees to pay Eureka non-refundable net fees in connection with the achievement of certain milestones, with total fees of $33.5 million for achievement of all milestones, including a $0.5 million fee for the activation of the second clinical site. As of March 31, 2026, ten patients have been dosed in the STARLIGHT-1 clinical trial, and we accrued approximately $8.3 million in accrued liabilities - related party for the outstanding dosing milestone payments. As of March 31, 2026, Estrella has paid $3.5 million to Eureka for fees associated with the study initiation milestones that have been achieved, $5.5 million for patient dosing, and $0.5 million for second site activation.

To date, Estrella has funded its operations primarily from: (i) the June 28, 2022 issuance of $5.0 million of our Series A Preferred Stock; (ii) net proceeds of approximately $20.1 million raised from completion of the Business Combination on September 29, 2023; (iii) net proceeds of approximately $2.3 million from Securities Purchase Agreements entered into from May 2025 to September 2025; and (iv) net proceeds of approximately $7.2 million from the Registered Direct Offering consummated on January 6, 2026. 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 STARLIGHT-1 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 March 31, 2026, we had an accumulated deficit of approximately $39.3 million. We have remitted payment of approximately $11.2 million to Eureka under the License Agreement and Services Agreement, paid $9.5 million to Eureka for fees associated with milestones under SOW #001, and made a $1.5 million deposit for patient treatment expenses, which will be applied to the final invoice.

We anticipate that our expenses will increase significantly in connection with our ongoing activities, as we:

• continue to advance the STARLIGHT-1 clinical trial 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.

Recent Developments

STARLIGHT-1 Clinical Trial Progress

In November 2025, the Company announced the completion of Phase I dosing in the STARLIGHT-1 clinical trial of EB103, our lead product candidate. On January 9, 2026, one Phase II patient was dosed in the STARLIGHT-1 clinical trial, representing the tenth patient dosed in total. All dosing milestones recognized as of March 31, 2026 have been recorded as research and development expense under the SOW with Eureka. The Company continues to enroll patients and advance the STARLIGHT-1 clinical trial.

January 2026 Registered Direct Offering and Private Placement

On January 6, 2026, the Company consummated a Registered Direct Offering (“RDO”) and concurrent Private Placement pursuant to a Securities Purchase Agreement entered into with a healthcare-focused institutional investor, resulting in gross proceeds of approximately $8.0 million before deducting placement agent fees and other offering expenses of approximately $0.8 million.

The Company issued 4,063,290 shares of Common Stock and Pre-Funded Warrants to purchase 1,000,000 shares of Common Stock at an exercise price of $0.00001 per warrant share pursuant to its shelf registration statement. The Company also issued Common Stock Warrants exercisable for up to 7,594,935 shares of Common Stock at an exercise price of $1.39 per warrant share, expiring on January 6, 2031. On January 16, 2026, the Company filed a registration statement on Form S-1 to register the resale of shares issuable upon exercise of the Common Stock Warrants, which became effective on January 23, 2026.

During the three months ended March 31, 2026, 631,000 Pre-Funded Warrants were exercised, resulting in the issuance of 631,000 shares of Common Stock. The remaining 369,000 Pre-Funded Warrants were subsequently exercised on April 8, 2026.

Business Combination and Corporate History

On September 29, 2023, we consummated the Business Combination with TradeUP Acquisition Corp. (“UPTD”) pursuant to the terms of the Merger Agreement. For financial accounting and reporting purposes under GAAP, Estrella was the accounting acquirer, and the Business Combination was accounted for as a reverse recapitalization. The consolidated assets, liabilities, and results of operations of Estrella became the historical consolidated financial statements of the combined company.

On June 26, 2024, the Company completed a short-form merger to absorb its wholly-owned subsidiary, Estrella Biopharma Inc., and 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 Estrella Immunopharma (Hong Kong) Co. Ltd. (“Estrella HK”) as a wholly-owned subsidiary to support strategic collaborations and operations in Asia.

Nasdaq Listing Compliance

On January 7, 2026, we received a written notice from Nasdaq indicating that we were not in compliance with Nasdaq Listing Rule 5620(a) due to our failure to hold an annual meeting of shareholders within twelve months of the end of our transition period ended December 31, 2024. On February 27, 2026, Nasdaq granted us an extension until June 29, 2026 to regain compliance. We intend to satisfy this requirement by holding a joint 2025/2026 annual meeting of shareholders.

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 clinical-stage testing of our product candidates, EB103 and EB104, preparation and submission of the IND application for EB103, and conduct of the STARLIGHT-1 clinical trial.

Results of Operations for the Three Months Ended March 31, 2026 and 2025 (Unaudited)

Research and Development Expenses

Research and development expenses consist primarily of costs related to conducting work related to the STARLIGHT-1 clinical trial, which is principally performed by Eureka under the SOW.

For the three months ended March 31, 2026 and 2025, we incurred approximately $1.4 million of research and development expenses. All research and development expenses incurred for the periods presented were dedicated to the development of ARTEMIS® T-cell therapies targeting CD19 and CD22.

The breakdown of research and development expenses by category for the three months ended March 31, 2026 and 2025 is summarized below:

(Unaudited)

(Unaudited)

Research and development expenses for both three months periods ended March 31, 2026 and 2025 each included costs associated with one patient dosed under SOW #001. Stock-based compensation allocated to research and development remained consistent at approximately $10,000 per quarter for both periods.

General and Administrative Expenses

For the three months ended March 31, 2026 and 2025, we incurred approximately $0.9 million and $0.7 million in general and administrative expenses, respectively. The increase of approximately $0.2 million, or 28.5%, was primarily attributable to higher legal and professional fees incurred to support our operations, as well as a loss of $108,627 recognized for the three months ended March 31, 2026 for the change in fair value of derivative liabilities related to the True-Up feature embedded in the Securities Purchase Agreements entered into from May to September 2025.

Net Loss

We incurred a net loss of approximately $2.3 million and $2.1 million for the three months ended March 31, 2026 and 2025, 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 March 31, 2026, we had cash and cash equivalents of approximately $1.9 million and a working capital deficit of approximately $6.8 million. Since our inception, we have expended substantial funds on research and development and have experienced significant losses and negative cash flows from operations. For the three months ended March 31, 2026, we reported a net loss of approximately $2.3 million and net cash used in operating activities of approximately $6.7 million. As of March 31, 2026, we had an accumulated deficit of approximately $39.3 million.

Going Concern and Management’s Assessment of Liquidity

We expect our expenses and operating losses to increase significantly as we continue to advance our product candidates through clinical development, particularly in connection with the Phase I/II STARLIGHT-1 clinical trial of EB103. Our recurring losses from operations, accumulated deficit, and need for additional financing to fund future operations, raise substantial doubt about our ability to continue as a going concern.

To fund our operations, we completed a private placement between May and September 2025, receiving gross proceeds of approximately $2.4 million. On January 6, 2026, we consummated a registered direct offering and concurrent private placement resulting in gross proceeds of approximately $8.0 million. Despite these recent financing activities, management is of the opinion that we will not have sufficient funds to meet our working capital requirements and debt obligations as they become due starting from one year from the date of this report. If we are unable to obtain adequate financing or generate significant revenue, we may be required to curtail or cease our operations.

Material Cash Requirements and Capital Sources

Our primary use of cash is to fund operating expenses, primarily consisting of clinical trial activities and related research and development costs. Pursuant to the SOW with Eureka for the STARLIGHT-1 clinical trial, we agreed to pay total non-refundable net fees of $33.5 million for the achievement of all projected milestones, including a $0.5 million fee for the activation of the second clinical site. As of March 31, 2026, we have cumulatively incurred approximately $17.8 million to Eureka for milestones achieved, and we hold an accrued liability to related parties of approximately $8.3 million for the outstanding milestone payments.

Our ability to fund our operations is dependent on our cash on hand, our ability to raise debt or additional equity financing, and ultimately our ability to generate sufficient revenue. We plan to raise additional capital in the future; however, there is no assurance that such financing will be available on acceptable terms, or at all. Furthermore, while we have tradeable warrants outstanding, it is unlikely that holders will exercise these warrants to provide additional liquidity in the near term, as the current market price of our Common Stock ($1.26 per share as of May 11, 2026) is significantly lower than the $11.50 per share exercise price. Additionally, our Common Stock Purchase Agreement with White Lion Capital LLC expired on December 30, 2025, and is no longer available as a source of liquidity.

Cash Flows

Operating Activities

Net cash used in operating activities was approximately $6.7 million for the three months ended March 31, 2026, and was primarily attributable to (a) a net loss of approximately $2.3 million, (b) approximately $59,000 decrease in other payables and accrued liabilities primarily due to the settlement of various previously accrued expenses, and (c) a decrease of $4.7 million in related party liabilities (accrued liabilities and accounts payable), resulting primarily from the settlement of milestone invoices previously due to Eureka, offset by (i) approximately $0.3 million (net) non-cash items, consisting of change in fair value of derivative liabilities and stock-based compensation under the 2023 Plan, and (ii) approximately $63,000 decrease in prepaid expenses and other receivables primarily due to the utilization of previously recorded prepaid expenses during the three months ended March 31, 2026.

Net cash used in operating activities was approximately $0.5 million for the three months ended March 31, 2025, and was primarily attributable to (a) a net loss of approximately $2.1 million, and (b) approximately $84,000 decrease in other payables and accrued liabilities primarily due to the settlement of various previously accrued expenses, offset by (i) approximately $1.4 million increase in accrued liability – related party as additional service charges were incurred from Eureka following the completion of one patient’s dosing milestone (see Note 5 and Commitments and Contingencies section), (ii) approximately $0.2 million non-cash item of stock-based compensation under the 2023 Plan, and (iii) approximately $0.2 million decrease in prepaid expenses and other receivables primarily due to the utilization of previously recorded prepaid expenses during the three months ended March 31, 2025.

Financing Activities

Net cash provided by financing activities was approximately $7.2 million for the three months ended March 31, 2026, and was primarily attributable to net proceeds of approximately $7.2 million received from the Registered Direct Offering and concurrent Private Placement consummated on January 6, 2026, net of placement agent fees and offering expenses.

Net cash used in financing activities was approximately $29,000 for the three months ended March 31, 2025, consisting entirely of open market repurchases of our common stock under our stock repurchase program.

Off-Balance Sheet Arrangements

As of March 31, 2026 and December 31, 2025, 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 and 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 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.

License Agreement

Pursuant to the License Agreement with Eureka, 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.

As of March 31, 2026, we have fully paid the $1.0 million license fee to Eureka. Two development milestones - the IND submission of EB103 to the FDA (“Milestone 1”, $50,000, paid October 2023) and the first patient dosed in the first clinical trial of a licensed product (“Milestone 2”, $50,000, paid September 2024) have been earned by Eureka and paid in full. No other development milestones, sales milestones, or royalty payments have been earned or are payable, 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 pay Eureka $10.0 million in connection with the services thereunder, payable in twelve equal monthly installments, and to reimburse Eureka on a monthly basis for reasonable pass-through costs. 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 by the parties in writing. As of March 31, 2026, we have fully settled all amounts owed under the Services Agreement, and there are no outstanding accounts payable or related-party liabilities associated with this agreement.

Statement of Work

Pursuant to the SOW (and Amendment No. 1), Estrella agreed to pay Eureka total fees of up to $33.5 million in connection with the Phase I/II clinical trial of EB103, including a $0.5 million fee for the activation of the second clinical site. As of March 31, 2026, ten patients have been dosed and two clinical sites are active.

Amounts related to the SOW are accrued as earned by Eureka and recorded as research and development expense. As of March 31, 2026, approximately $8.3 million in earned but not yet formally invoiced milestone payments were recorded as accrued liability - related party on our unaudited condensed consolidated balance sheet. The $1.5 million deposit for patient treatment expenses continues to be recorded as prepaid expenses - related party, non-current, and will be applied against the final invoice.

Office Lease

We have entered into a series of short-term office sublease agreements with Eureka for 180 square feet of office space at a monthly fee of $2,000. The current sublease (Lease 5) commenced January 1, 2026 and expires June 30, 2026. As of March 31, 2026, total future minimum payments under Lease 5 are $6,000 (April through June 2026).

Equity Financing — 2025 Securities Purchase Agreements

From May 2025 to September 2025, we entered into Securities Purchase Agreements with three accredited investors. Each agreement includes a True-Up feature pursuant to which we may be required to issue additional shares of Common Stock (up to a maximum of 735,857 True-Up Shares in aggregate) if our Common Stock price is below $1.50 on the 12-month anniversary of each respective agreement. This True-Up feature is recorded as a derivative liability, measured at fair value through earnings. As of March 31, 2026, the fair value of this derivative liability was $465,132.

Equity Financing — January 2026 Registered Direct Offering

In connection with the January 6, 2026 RDO, we issued Common Stock Warrants exercisable for up to 7,594,935 shares of Common Stock at $1.39 per share, expiring January 6, 2031. The Common Stock Warrants are equity-classified. We also fulfilled our registration obligation related to the Common Stock Warrants through a Form S-1 that became effective January 23, 2026. As of March 31, 2026, no Common Stock Warrants have been exercised.

Critical Accounting Policies and Estimates

Our financial statements and accompanying notes have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and the 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 for 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 operations. Certain accounting estimates are particularly sensitive because of their significance to our 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 the following significant estimates and accounting policies.

Derivative Liabilities

We evaluate all of our 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 March 31, 2026, the fair value of the derivative liability related to the True-Up Shares was valued at $465,132 using a Monte Carlo Simulation model. Key inputs included a volatility of 98% to 129%, a risk-free rate of 3.7%, and a spot price of $1.06 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 unaudited condensed 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.

Emerging Growth Company and Smaller Reporting Company Status

As an emerging growth company, we have elected to use the extended transition period for complying with new or revised accounting standards as permitted by the JOBS Act, which allows us to delay the adoption of these standards until they apply to private companies.

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.

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 March 31, 2026 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 GAAP accounting issues and to prepare and review financial statements and related disclosures under 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 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.

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 years ended December 31, 2025 and 2024. The implementation of the material aspects of this plan took place during 2025 and 2024. The remediation efforts included:

• Additional qualified personnel with appropriate levels of accounting knowledge and experience to address GAAP accounting issues have been added to prepare and review financial statements and related disclosures under GAAP.
• 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 have been put in place to establish proper segregation of duties and internal controls.

There were no changes in our internal control over financial reporting that occurred during the three months ended March 31, 2026, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. While the Company has continued to remediate certain previously identified material weaknesses, our chief executive officer and chief financial officer concluded that as of March 31, 2026, 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.

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-K filed with the SEC on March 18, 2026. 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-K filed with the SEC on March 18, 2026.