ESLA

Business Context and Reporting Period

Estrella Immunopharma, Inc. (ESLA) is a clinical-stage biopharmaceutical company developing T-cell therapies (EB103 and EB104) for blood cancers and solid tumors. This Form 10-Q covers the quarterly and six-month periods ended June 30, 2026. The Company is an emerging growth company and a smaller reporting company. As of June 30, 2026, the Company had 43,549,509 shares of Common Stock issued and outstanding.

Key Financial Metrics

Debt and Liquidity: The Company has no traditional debt but carries significant accrued liabilities, primarily related to milestone payments to a related party (Eureka Therapeutics, Inc.). Current liabilities of approximately $9.3 million significantly exceed current assets of $1.8 million, resulting in a working capital deficit of approximately $7.4 million.

Material Changes vs. Prior Period

• Operating Expenses: Total operating expenses decreased to $4.3 million for the six months ended June 30, 2026, from $7.6 million in the same period in 2025. This 44% reduction was primarily driven by a decrease in Research and Development (R&D) expenses from $6.1 million to $2.8 million, attributed to the timing of patient dosing milestones payable to Eureka.
• Derivative Liabilities: The Company recognized a loss of $330,719 for the six months ended June 30, 2026, due to the change in fair value of derivative liabilities (True-Up Shares). No such loss was recorded in the prior year period.
• Cash Position: Cash and cash equivalents declined from $1.4 million as of December 31, 2025, to $146,670 as of June 30, 2026, despite raising approximately $8.0 million in a January 2026 Registered Direct Offering. The decline was due to significant operating cash burn and the settlement of related party liabilities.

Guidance, Outlook, Risks, and Unusual Items

• Going Concern: Management has expressed substantial doubt about the Company's ability to continue as a going concern. Despite recent financing, the Company does not believe it has sufficient funds to meet working capital requirements and debt obligations for the next 12 months. Additional financing is required to continue operations.
• Clinical Progress: The Company completed Phase I dosing for the STARLIGHT-1 clinical trial in November 2025. As of June 30, 2026, 11 patients have been dosed (9 in Phase I, 2 in Phase II). One additional patient was dosed in July 2026 (subsequent event).
• Related Party Dependence: The Company relies heavily on Eureka Therapeutics, Inc. for manufacturing and clinical trial services under a Statement of Work (SOW). As of June 30, 2026, the Company accrued approximately $8.3 million in liabilities to Eureka for outstanding dosing milestones. Total potential fees under the SOW are $33.5 million.
• Internal Controls: The Company identified a material weakness in internal control over financial reporting due to a lack of qualified full-time personnel with appropriate accounting knowledge. Management is implementing remediation efforts.
• Unusual Items: The Company issued 463,636 True-Up Shares on July 1, 2026, to settle a derivative liability that became fixed during the quarter. Additionally, the Company terminated a consulting agreement with CoFame Management effective July 1, 2026.

Investor Verification Checklist

• Liquidity Runway: Verify the timeline and terms of any new financing arrangements, given the explicit "substantial doubt" regarding the ability to continue as a going concern and the low cash balance ($146,670).
• Related Party Obligations: Confirm the payment schedule and ability to settle the $8.3 million accrued liability to Eureka Therapeutics, Inc., which represents the majority of current liabilities.
• Clinical Milestone Costs: Review the specific triggers for the remaining $33.5 million in potential fees under the SOW with Eureka and the impact of future patient dosing on cash burn.
• Derivative Liability Exposure: Monitor the fair value of the remaining derivative liabilities associated with True-Up Shares, which fluctuate based on stock price volatility.
• Internal Control Remediation: Assess the progress of hiring qualified accounting personnel to address the material weakness in financial reporting controls.