Estrella Immunopharma, Inc. 10-K

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock and warrants trade on the Nasdaq Global Market under the symbols “ESLA” and “ESLAW,” respectively, since October 2, 2023. Holders As of June 30, 2024, there were 20 registered holders of record of our Common Stock and 1 holder of record of our warrants. This does not include the number of shareholders that hold shares in “street name” through banks or broker-dealers. Dividends We have not paid any cash dividends to date. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements and general financial condition. The payment of any cash dividends will be within the discretion of the Board at such time. Our ability to declare dividends may also be limited by restrictive covenants pursuant to any debt financing agreements. Unregistered Sales of Equity Securities The Company has not sold any within the past three years which were not registered under the Securities Act except as follows: Private Placements in Connection with UPTD IPO Substantially concurrently with the closing of the IPO, the Company completed the private sale of 295,000 Private Shares to the Founders at a purchase price of $10.00 per Private Placement Share, among which, the Sponsor purchased 236,000 Private Shares and Tradeup INC. purchased 59,000 Private Shares, generating gross proceeds to the Company of $2,950,000. The Private Shares are identical to the shares of Common Stock sold as part of the Units in the IPO, except that the Founders have agreed not to transfer, assign or sell any of the Private Shares (except to certain permitted transferees) until 30 days after the completion of the Company’s initial business combination. The issuance of the Private Shares was made pursuant to the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended. 124 Subscription Agreements In connection with the execution of the Merger Agreement, UPTD entered into subscription agreements (the “Subscription Agreements”) with each of Plentiful Limited, a Samoan limited company (“Plentiful Limited”) and Lianhe World Limited, a company incorporated in the People’s Republic of China (“Lianhe World” and together with Plentiful Limited, the “Subscribers”) pursuant to which the Subscribers have agreed to purchase, and UPTD has agreed to sell to the Subscribers, an aggregate of 1,000,000 shares of UPTD common stock for an aggregate purchase price of $10 million (the “Equity Financing”). The Equity Financing closed concurrently with the Business Combination on the Closing Date. Pursuant to the Subscription Agreements, within thirty days following the Closing Date, each Subscriber also became entitled to receive 704,819 shares of Common Stock, which were issued to each Subscribe in January 2024. In addition, within five days following the date that is 24 months following the Closing (the “24-Month Date”), if the VWAP of Common Stock for the fifteen trading days prior to the 24-Month Date (the “24-Month Date VWAP”) is less than $8.30, then each of them will be entitled to a number of shares of Common Stock equal to (i) (A) 8.30 minus (B) the 24-Month Date VWAP multiplied by (ii) (A) the number of Shares held by the Investor on the 24-Month Date minus (B) the number of shares acquired by the Investor following the Closing divided by 10.00. The Equity Subscription Line On April 20, 2023, the Company entered into 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, the Company has the right, but not the obligation to require White Lion to purchase, from time to time, up to the lesser of (i) $50,000,000 in aggregate gross purchase price of newly issued shares of Common Stock and (ii) the Exchange Cap, in each case, subject to certain limitations and conditions set forth in the Common Stock Purchase Agreement. The Common Stock Purchase Agreement contains customary representations, warranties, covenants and indemnification provisions. Subject to the satisfaction of certain customary conditions, the Company’s right to sell shares to White Lion has commenced on December 28, 2023, the effective date of the registration statement relating to the offer and resale from time to time of an aggregate of 3,829,338 shares of Common Stock (the “Commencement”) and extend until December 30, 2024. During such term, subject to the terms and conditions of the Common Stock Purchase Agreement, the Company shall notify White Lion when the Company exercises its right, in its sole discretion, to sell shares (the effective date of such notice, a “Notice Date”). The number of shares sold pursuant to any such notice will be equal to the lesser of (a) the number of shares of Common Stock which would result in White Lion beneficially owning more than 4.99% of the number of shares of Common Stock outstanding, (b) the number of shares equal to the product of (i) the Average Daily Trading Volume (as defined in the Common Stock Purchase Agreement) and (ii) 30% and, (c) the number of shares of Common Stock equal to the quotient obtained by dividing (i) the lower of (A) $1,000,000 and (B) Closing Sale Price (as defined in the Common Stock Purchase Agreement) of the Common Stock on the day prior to the Purchase Notice Date (as defined in the Common Stock Purchase Agreement). The aggregate number of Equity Line Shares that Estrella can sell to White Lion under the Common Stock Purchase Agreement may in no case exceed the maximum number of shares of Common Stock that Estrella can issue or sell to White Lion under the Common Stock Purchase Agreement pursuant to the applicable rules of the Principal Market (the “Exchange Cap”) without getting approval from its stockholders. If stockholder approval is obtained to issue Equity Line Shares above the Exchange Cap, the Exchange Cap will no longer apply. The purchase price to be paid by White Lion for any Equity Line Shares will equal (i) until an aggregate of $25,000,000 in shares have been purchased under the Common Stock Purchase Agreement, 97% of the lowest daily volume-weighted average price of Common Stock during the three consecutive trading days following the Notice Date, and (ii) thereafter, 98% of the lowest daily volume-weighted average price of Common Stock during the three consecutive trading days following the Notice Date. 125 The Common Stock Purchase Agreement will terminate automatically on the earliest of (i) December 30, 2024; (ii) the date when White Lion buys all the Equity Line Shares it agreed to buy under the Common Stock Purchase Agreement; (iii) the date when Estrella files for bankruptcy, has a bankruptcy case filed against it, has a custodian appointed for it or its property, or assigns its assets to its creditors. The Common Stock Purchase Agreement may be terminated by (i) Estrella with three days’ notice to White Lion after the Commencement, provided that Estrella pays the Commitment Fee (as defined below) and consults with White Lion before announcing the termination; (ii) the parties by mutual written consent at any time; or (iii) White Lion with three days’ notice to the Company if any of the following events occurs: (a) a material adverse effect on Estrella or its business; (b) a Fundamental Transaction involving Estrella or its securities; (c) a material breach or default by Estrella of the White Lion RRA that is not cured within 15 days; (d) a lapse or unavailability of a registration statement for more than 45 consecutive days or 90 days in a year, unless caused by White Lion; (e) a suspension of trading of Common Stock on the Principal Market for more than five days; or (f) a material breach or default by Estrella of the Common Stock Purchase Agreement that is not cured within 15 days. The Company must notify White Lion and, if required, the public of any of these events within 24 hours. In consideration for the commitments of White Lion, UPTD agreed to cause Estrella to issue to White Lion, immediately prior to the Closing, an aggregate of 250,000 shares of Estrella Series A Preferred Stock, which the parties have acknowledged has a value of $250,000 (the “Commitment Fee”). Accordingly, concurrently on April 20, 2023, Estrella and White Lion entered into a Joinder to the Estrella Series A Preferred Stock Purchase Agreement (the “Joinder”), pursuant to which Estrella agreed to issue the 250,000 shares of Estrella Series A Preferred Stock comprising the Commitment Fee immediately prior to Closing, subject to the Closing occurring on or before July 19, 2023 or such later date as may be mutually agreed upon in writing by Estrella and White Lion. Additionally, pursuant to the Joinder, White Lion agreed to purchase 500,000 shares of Estrella Series A Preferred Stock for $500,000 in cash immediately prior to the Closing, subject to the Closing occurring on or before July 19, 2023 or such later date as may be mutually agreed upon by Estrella and White Lion. Upon closing of the transactions contemplated by the Joinder, the 750,000 shares of Series A Preferred Stock of Estrella issued to White Lion automatically converted into 750,000 shares of common stock of Estrella immediately prior to the Effective Time and then into Common Stock based on the exchange ratio determined by the total number of shares of common stock of Estrella outstanding at the Effective Time in accordance with the Merger Agreement. Estrella Series A Preferred Stock Purchase Agreements 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 $5,000,000 by issuing 5,000,000 shares of its Series A Preferred Stock. The shares of Series A Preferred Stock were sold for $1.00 per share. On the Closing Date, immediately prior to the Effective Time, such shares of Estrella Series A Preferred Stock were converted into shares of Common Stock and then into Merger Consideration Shares at an exchange ratio of approximately 0.2407 in accordance with the Merger Agreement. 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 9,250,000 shares of Estrella’s Series A Preferred Stock for $9,250,000 ($730,000 of which was comprised of funds in the trust account delivered to Estrella 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 IPO) immediately prior to the effective time of Estrella’s Merger with UPTD. Subsequently and immediately prior to the effective time of the Merger with UPTD, such shares of Estrella’s Series A Preferred Stock converted into Estrella common stock and then into Merger Consideration Shares at an exchange ratio of approximately 0.2407 in accordance with the Merger Agreement. In addition, immediately prior to the Effective Time, 500,000 shares of Estrella’s Series A Preferred Stock were issued to White Lion for $500,000 and 250,000 shares of Estrella’s Series A Preferred Stock were issued to White Lion in consideration for its commitments under the Common Stock Purchase Agreement pursuant to the Joinder to the Series A Preferred Stock Purchase Agreement between Estrella and White Lion, dated April 20, 2023, as further described in in the preceding section. Subsequently, immediately prior to the Effective Time, such shares of Estrella Series A Preferred Stock were converted into shares of Common Stock and then into Merger Consideration Shares at an exchange ratio of approximately 0.2407 in accordance with the Merger Agreement. 126 The securities described above were offered and sold pursuant to the exemption from the registration provided by Section 4(a)(2) of the Securities Act or Rule 506 of Regulation D promulgated thereunder. The following table provides information with respect to repurchases of Common Stock during each month of the quarter ended June 30, 2024. Issuer Purchases of Common Stock (i) Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs April 1, 2024 – April 30, 2024 136,569 $ 1.16 211,459 $ 757,382.60 May 1, 2024 – May 31, 2024 60,429 $ 1.05 271,888 $ 693,792.06 June 1, 2024 – June 30, 2024 49,906 $ 0.97 321,794 $ 645,560.09 Total 246,904 (i) All shares of Common Stock repurchased during the quarter ended June 30, 2024 were made in open-market transactions pursuant to the authorization of the Company’s board of directors to repurchase up to $1,000,000 of the Company’s common stock as publicly announced in the Company’s press release issued on January 30, 2024 and included as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on the same date. The authorization does not have an expiration date. While the Company anticipates as of the date hereof that it will continue to repurchase shares of Common Stock pursuant to the authorization, the Company is not obligated to repurchase any particular amount of Common Stock pursuant to the authorization and the timing, method and amount of any repurchases made pursuant to the authorization in the future may depend on market conditions and other factors. Item 6. [Reserved] 127