What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-02-14 compared with 2023-11-20 · 253 added, 230 removed, 176 unchanged (73% of the section changed)

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OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Unless the context

otherwise requires, for purposes of this section, the terms “Company’, “we,” “us,” “our,”

refer to Immunopharma, Inc.

collectively with its subsidiary Estrella Biopharma, Inc., while the term “Estrella” refers to

Estrella Biopharma, Inc.

prior to closing of the Business Combination.

The following discussion and analysis of our results of operations

and financial condition should be read together with our unaudited condensed consolidated financial statements and the notes thereto,

which are included elsewhere in this Report and our audited financial statements as exhibit 99.1 on Form 8-K filed with the SEC on October

5, 2023 and the section entitled “Management’s Discussion and Analysis of Financial Conditions and Results of Operations”

included in the Company’s Registration Statement on Form S-1, filed with the SEC on October 11, 2023 and amended on November 13,

Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks

and uncertainties.

Our financial statements have been prepared in accordance with accounting principles generally accepted in the United

States of America (“U.S.

The Company is

a preclinical-stage biopharmaceutical company developing T-cell therapies with the capacity to address treatment challenges for patients

with blood cancers and solid tumors.

We believe T-cell therapy continues to represent a revolutionary step towards providing a potential

solution for many forms of cancer, including cancers poorly addressed by current approaches.

Unless the context otherwise requires, for purposes of this section,

the terms “Company’, “we,” “us,” “our,” refer to Immunopharma, Inc.

collectively with

its subsidiary Estrella Biopharma, Inc., while the term “Estrella” refers to Estrella Biopharma, Inc.

prior to closing of

the Business Combination.

The following discussion and analysis of our results of operations and financial condition should be read together

with our unaudited condensed consolidated financial statements and the notes thereto, which are included elsewhere in this Report and

our audited financial statements as exhibit 99.1 on Form 8-K filed with the SEC on October 5, 2023 and the section entitled “Management’s

Discussion and Analysis of Financial Conditions and Results of Operations” included in the Company’s Registration Statement

on Form S-1, filed with the SEC on October 11, 2023 and amended on November 13, 2023 and December 18, 2023.

Certain information contained

in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties.

Our financial

statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

The Company is a preclinical-stage

biopharmaceutical company developing T-cell therapies with the capacity to address treatment challenges for patients with blood cancers

and solid tumors.

We believe T-cell therapy continues to represent a revolutionary step towards providing a potential solution for many

forms of cancer, including cancers poorly addressed by current approaches.

On June 28, 2022, pursuant

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from product sales.

As of September 30, 2023 we

As of December 31, 2023 we

had an accumulated deficit of approximately $15.1 million.

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

to advance preclinical and clinical development of our product candidates and preclinical

to advance preclinical and clinical development of our product candidates and preclinical programs;

regulatory approval for any product candidates that successfully complete clinical trials;

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expand, and protect our intellectual property portfolio;

operational, financial and management information systems and personnel, including personnel

to support our product development and planned future commercialization efforts;

operational, financial and management information systems and personnel, including personnel to support our product development and planned

future commercialization efforts;

additional legal, accounting and other expenses in operating as a public company.

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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 note will be payable 30 days

after the closing date of the Merger of September 29, 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.

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

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,

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The results of operations

for the three months ended September 30, 2023 and 2022 represented Estrella’s results of operations to be comparable with the same

period in 2022

for the three and six months ended December 31, 2023 and 2022 represented Estrella’s results of operations to be comparable with

the same period in 2022

There are two major expenses incurred for the

past and current operation:

Comparison of Three Months Ended December 31,

2023 and 2022

Research and Development Expenses

Research and development expenses

consist primarily of costs related to the enhancement of our technology which were mainly performed by Eureka.

For the three months ended

September 30, 2023 and 2022, we incurred approximately $0.5 million and $2.6 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 decrease in research and development expenses was mainly due to Estrella not incurring service

fees with Eureka under the Services Agreement for the three months ended September 30, 2023.

consist primarily of costs related to conducting work related to IND-enabling, IND-filing and clinical trial preparation, which were mainly

performed by Eureka.

For the three months ended December 31, 2023 and 2022, we incurred approximately $75,000 and $2.6 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 decrease in research and development expenses

was mainly due to Estrella incurring lower service fees with Eureka due to a lower volume of service rendered under the Services Agreement

during the three months ended December 31, 2023 compared to the three months ended December 31, 2022.

Our breakdown of research

and development expenses by categories for the three months ended September 30, 2023 and 2022 are summarized below:

Three Months Ended September 30,

and development expenses by categories for the three months ended December 31, 2023 and 2022 are summarized below:

Three Months Ended December 31,

Consulting and laboratory related fee

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General and administrative expense

For the three months ended September 30, 2023 and 2022, we incurred

approximately $1.4 million and $0.3 million of general and administrative expenses, respectively.

The increase in general and administrative

expenses for the three months ended September 30, 2023, was mainly due to an increase in professional fee, and recognition of the acceleration

of the stock based compensation upon consummation of the Business Combination.

The increase was also attributable to approximately $0.4

million of bonus granted to our executive officers in recognition of their service.

For the three months ended

December 31, 2023 and 2022, we incurred approximately $0.9 million and $0.1 million of general and administrative expenses, respectively.

The increase in general and administrative expenses for the three months ended December 31, 2023, was mainly due to an increase in professional

fee such as audit fee and legal fee.

We incurred a net loss of

approximately $1.9 million and $2.9 million for the three months ended September 30, 2023 and 2022, respectively.

approximately $1.0 million and $2.8 million for the three months ended December 31, 2023 and 2022, respectively.

We expect our research

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and incur additional legal, accounting, and other expenses in operating as a public company.

Comparison of Six Months Ended December 31,

2023 and 2022

Research and Development Expenses

and development expenses consist primarily of costs related to conducting work related to IND-enabling, IND-filing and clinical trial

preparation, which were mainly performed by Eureka.

For the six months ended December 31, 2023 and 2022, we incurred approximately $0.6

million and $5.2 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.

in research and development expenses was mainly due to Estrella incurring lower service fees with Eureka due to a lower volume of service

rendered under the Services Agreement for the six months ended December 31, 2023 compared to the six months ended December 31, 2022.

breakdown of research and development expenses by categories for the six months ended December 31, 2023 and 2022 are summarized below:

Six Months Ended December 31,

Consulting and laboratory related fee

Stock based compensation

Total research and development

General and administrative expense

the six months ended December 31, 2023 and 2022, we incurred approximately $2.3 million and $0.4 million of general and administrative

expenses, respectively.

The increase in general and administrative expenses for the three months ended December 31, 2023, was mainly due

to an increase in professional fee, and recognition of the acceleration of the stock-based compensation upon consummation of the Business

The increase was also attributable to approximately $0.5 million of bonus granted to our executive officers in recognition

of their service.

incurred a net loss of approximately $2.9 million and $5.6 million for the six months ended December 31, 2023 and 2022, 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, 2023,

we had cash of approximately $22.1 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

As of December 31, 2023, we

had cash of approximately $9.0 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 revenues from any source, and we do not expect to generate revenue for at least the next few years.

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

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(i) $9.75 million from the issuance of shares of Estrella Series

A Preferred Stock immediately prior to the closing of the Business Combination ($730,000 of which was comprised of funds in the trust

A Preferred Stock immediately prior to the closing of the Business Combination ($0.7 million 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.

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PIPE investors pursuant to the Subscription Agreements.

On October 10, 2023, we remitted approximately $9.3 million to Eureka upon consummation

of the Business Combination.

We expect to devote the remaining net proceeds from the Business Combination to the preclinical and clinical

development of our product candidates and our public company compliance costs.

Based on our current operating plan, we expect that the

net proceeds from the Business Combination will be able to fund our operating expenses and capital requirements through one year from

the issuance of these unaudited condensed consolidated financial statements.

However, this estimate is subject to various uncertainties

and risks, some of which are beyond our control.

We may use our available capital resources sooner than we currently anticipate, and we

may need to seek additional funds sooner than planned.

Our estimate as to how long we expect the net proceeds from the Business Combination

to be able to fund our operating expenses and capital requirements is based on assumptions that may prove to be wrong, and we could use

our available capital resources sooner than we currently expect.

Changing circumstances, some of which may be beyond our control, could

result in fewer cash and cash equivalents available to us or cause us to consume capital significantly faster than we currently anticipate,

and we may need to seek additional funds sooner than planned.

On October 10, 2023, we remitted

approximately $9.3 million to Eureka upon consummation of the Business Combination.

We expect to devote the remaining net proceeds from

the Business Combination to the preclinical and clinical development of our product candidates and our public company compliance costs.

Based on our current operating plan, we expect that the net proceeds from the Business Combination will be able to fund our operating

expenses and capital requirements through one year from the issuance of these unaudited condensed consolidated financial statements.

this estimate is subject to various uncertainties and risks, some of which are beyond our control.

We may use our available capital resources

sooner than we currently anticipate, and we may need to seek additional funds sooner than planned.

Our estimate as to how long we expect

the net proceeds from the Business Combination to be able to fund our operating expenses and capital requirements is based on assumptions

that may prove to be wrong, and we could use our available capital resources sooner than we currently expect.

Changing circumstances,

some of which may be beyond our control, could result in fewer cash and cash equivalents available to us or cause us to consume capital

significantly faster than we currently anticipate, and we may need to seek additional funds sooner than planned.

Our future operations are

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and, ultimately (6) regulatory approval and successful commercialization and market acceptance of our product candidates.

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 is dependent on a number of factors, including the market demand for our securities, which itself is subject to a number of business

risks and uncertainties, as well as uncertainty that we would be able to raise such additional capital at a price or on terms that are

favorable to us.

If we raise additional capital by issuing equity securities, our then-existing stockholders will experience dilution

and the market price of our common stock may decline.

We cannot be certain that additional financing, whether debt or equity, will be

available in amounts or on terms acceptable to us, if at all.

In addition, there is no assurance

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common stock, which had not been obtained as of the date hereof and may not be obtained in the future.

Additionally, such shares will

only be issuable to White Lion upon effectiveness of a registration statement for the Equity Line Shares, which had not occurred 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.

As of the date hereof, no Equity Line Shares

have been issued to White Lion under the Common Stock Purchase Agreement.

We plan to raise additional

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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.

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.

Operating activities

Net cash used in operating

activities was approximately $0.3 million for the three months ended September 30, 2023, and was primarily attributable to a net loss

of approximately $1.9 million, offset by approximately $1.6 million increase in non-cash item such as stock-based compensation as we incurred

amortization for the three months ended September 30, 2023 related to the stock options granted to our employees, board of directors,

and other consultants under the Incentive Plan.

activities was approximately $11.5 million for the six months ended December 31, 2023, and was primarily attributable to (a) a net loss

of approximately $2.9 million, approximately $9.3 million decrease in accounts payable, related party, as we remitted approximately $9.2

million payment to Eureka, consisting of the upfront payment incurred under the License Agreement and monthly service provided by Eureka

under the Services Agreement on October 10, 2023, (b) approximately $0.3 million increase in prepaid expense as we prepaid 12 months

D&O insurance premium in October 2023, and (c) approximately $0.3 million decrease in other payables and accrued liabilities as we

paid off accrued professional fee over the previous period, offset by approximately $1.2 million increase in non-cash item such as stock-based

compensation as we incurred amortization for the six months ended December 31, 2023 related to the stock options granted to our employees,

board of directors, and other consultants under the Incentive Plan.

Net cash used in operating

activities was approximately $1.1 million for the three months ended September 30, 2022 and was primarily attributable to a net loss

of approximately $2.9 million, offset by (a) approximately $0.8 million increase in account payable related party which related to service

fee incurred from the Services Agreement, (b) approximately $0.1 million increase in non-cash item such as stock-based compensation as

we incurred amortization for the three months ended September 30, 2022 related to the stock options granted to our employees, board of

directors, and other consultants under the Incentive Plan for the year ended June 30, 2022, (c) approximately $0.8 million decrease in

prepaid expenses as we utilized prior prepaid service fees from the Services Agreement in the current period, and (d) an approximately

$66,050 increase in other payables and accrued liabilities as we accrued various legal, consulting, and research and development expenses

related to the Business Combination.

activities was approximately $1.2 million for the six months ended December 31, 2022 and was primarily attributable to a net loss of approximately

$5.6 million, offset by (a) approximately $3.4 million increase in account payable related party which related to service fee incurred

from the Services Agreement, (b) approximately $0.2 million increase in non-cash item such as stock-based compensation as we incurred

amortization for the six months ended December 31, 2022 related to the stock options granted to our employees, board of directors, and

other consultants under the Incentive Plan for the six months ended December 31, 2022, (c) approximately $0.8 million decrease in prepaid

expenses as we utilized prior prepaid service fees from the Services Agreement in the current period, and (d) an approximately $18,000

increase in other payables and accrued liabilities as we accrued various legal, consulting, and research and development expenses related

to the Business Combination.

Investing activities

Net cash used in investing

activities was approximately $0.1 million for the three months ended September 30, 2023, and was primarily attributable approximately $0.1 million loan to UPTD as

Monthly Extension Payment before merger.

Net cash provided by investing

activities was approximately $4.9 million for the six months ended December 31, 2023, and was primarily attributable to approximately

$5.1 million cash released from trust account as a result of the consummation of the Business Combination, offset by approximately $0.1

million loan to UPTD as Monthly Extension Payment before merger.

Financing activities

Net cash provided by financing

activities was approximately $20.0 million for the three months ended September 30, 2023, and was primarily attributable to approximately

activities was approximately $13.1 million for the six months ended December 31, 2023, and was primarily attributable to approximately

$20.0 million net proceed received from the consummation of the Business Combination, which included approximately $9.0 million in gross

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proceeds raise from the reverse recapitalization, and $10.0 million net proceeds from the PIPE Investment that closed concurrently with

the consummation of the Business Combination.

the consummation of the Business Combination, offset by approximately $1.5 million payments of transaction cost related to the Merger,

and approximately $5.1 million payment to UPTD’s stockholder for stock redemption before the Business Combination.

Off-Balance Sheet Arrangements

As of September 30, 2023 and

As of December 31, 2023 and

June 30, 2023, we did not have, nor do we currently have, any off-balance sheet arrangements as defined under the rules and regulations

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License Agreement

Pursuant to the License Agreement,

we were obligated to make (i) a one-time, non-refundable, non-creditable payment of $1,000,000, payable in 12 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, 2023, we have paid two installments, an aggregate

of approximately $0.2 million, of the upfront payment to Eureka.

On January 30, 2023, one development

milestone payment in the amount of $50,000 related to the submission of EB103 to the FDA was earned by Eureka under the Agreement, which

has not been paid as of the date hereof.

No other development milestone, 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.

On October 10, 2023, the balance of the upfront fee in the amount of approximately $0.9 million and the $50,000 development milestone payment

related to the submission of EB103 to the FDA was paid to Eureka.

to the License Agreement, we were obligated to make (i) a one-time, non-refundable, non-creditable payment of $1,000,000, 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.

of December 31, 2023, we have fully paid the license fee to Eureka.

January 30, 2023, one development milestone payment in the amount of $50,000 related to the submission of EB103 to the FDA was earned

by Eureka under the Agreement, which was paid on October 10, 2023.

No other development milestone, 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.

Collaboration Agreement

Pursuant to the Collaboration

Agreement, we and Imugene will be separately responsible for all qualified full-time person (“FTE”) and other internal costs

incurred in the performance of its research, as well as the full cost of procurement of leukopaks and purification of T-cells from two

donors, and of manufacturing and quality control of EB103 T-cells under the research plan.

Any joint cost will be shared equally.

we or Imugene incurs out-of-pocket costs in excess of the amount budgeted for such costs in the applicable research budget plus allowable

overruns, then the other party will not be responsible for its 50% share of the excess of such budgeted amount plus allowable overruns,

unless the joint steering committee approves such excess costs (either before or after such costs have been incurred).

to the Collaboration Agreement, we and Imugene will be separately responsible for all qualified full-time person (“FTE”) and

other internal costs incurred in the performance of its research, as well as the full cost of procurement of leukopaks and purification

of T-cells from two donors, and of manufacturing and quality control of EB103 T-cells under the research plan.

Any joint cost will be

shared equally.

If either we or Imugene incurs out-of-pocket costs in excess of the amount budgeted for such costs in the applicable research

budget plus allowable overruns, then the other party will not be responsible for its 50% share of the excess of such budgeted amount plus

allowable overruns, unless the joint steering committee approves such excess costs (either before or after such costs have been incurred).

research plan under the Collaboration Agreement was completed as of August 30, 2023.

Services Agreement

Pursuant to the Services Agreement,

we agreed to (i) pay Eureka $10,000,000 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.

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.

As of September 30, 2023, we had remitted to Eureka

two installments of $1,666,667 and $21,560 of pass-through costs for services provided pursuant to the Services Agreement.

On October 10, 2023 we

remitted the remaining monthly installment payments under the Services Agreement and License Agreement in the amount of approximately $9.3

million to Eureka.

to the Services Agreement, we agreed to (i) pay Eureka $10,000,000 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.

As of December 31,

2023, we had remitted to Eureka twelve installments of $10,000,000 and $117,920

o f pass-through costs for services provided pursuant to the Services Agreement.

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 the lesser of (i) $50,000,000

in aggregate gross purchase price of newly issued shares of Common Stock of New Estrella and (ii) the Exchange Cap (as defined below),

in each case, subject to certain limitations and conditions set forth in the Common Stock Purchase Agreement.

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.

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 the lesser of (i) $50,000,000 in aggregate gross purchase price of newly issued shares of Common

Stock of New Estrella and (ii) the Exchange Cap (as defined below), in each case, subject to certain limitations and conditions set forth

in the Common Stock Purchase Agreement.

Registration Rights

The holders of 312,200 shares of common stock that were issued to the

initial stockholders of UPTD (the “Founder Shares”) and of 1,107,500 shares of Common Stock issued to certain investors in

a private placement in connection with UPTD’s initial public offering (the “Private Shares”) are entitled to registration

rights pursuant to a registration rights agreement, dated July 14, 2021, among TradeUP Acquisition Corp., TradeUP Acquisition Sponsor

LLC and certain security holders named therein.

The Company assumed the obligations of UPTD under such agreement upon consummation of

the Business Combination.

The holders of the majority of these securities are entitled to make up to three demands, excluding short form

demands, that the Company registers such securities.

In addition, the holders have certain “piggy-back” registration rights

with respect to registration statements filed subsequent to the completion of the initial Business Combination and rights to require the

Company to register for resale such securities pursuant to Rule 415 under the Securities Act.

We are also obligated to file a registration

statement for the (i) Equity Line Shares that we may issue to White Lion pursuant to the Common Stock Purchase Agreement and White Lion

RRA, (ii) up to 2,225,000 shares of Common Stock issuable upon exercise of the Warrants and (iii) the shares issued or that will be issued

pursuant to the Subscription Agreements.

The Company will bear the expenses incurred in connection with the filing of any such registration

The Company filed a registration statement on Form S-1 with the SEC on October 10, 2023 and Amendment No.

1 thereto on November

13, 2023 with respect to the Founder Shares, Private Shares, Equity Line Shares, the shares of Common Stock issuable upon exercise of

the Warrants and certain shares issuable under the Subscription Agreements.

The registration statement had not been declared effective

as of the date hereof.

holders of 312,200 shares of common stock that were issued to the initial stockholders of UPTD (the “Founder Shares”) and

of 1,107,500 shares of Common Stock issued to certain investors in a private placement in connection with UPTD’s initial public

offering (the “Private Shares”) are entitled to registration rights pursuant to a registration rights agreement, dated July

14, 2021, among TradeUP Acquisition Corp., TradeUP Acquisition Sponsor LLC and certain security holders named therein.

The Company assumed

the obligations of UPTD under such agreement upon consummation of the Business Combination.

The holders of the majority of these securities

are entitled to make up to three demands, excluding short form demands, that the Company registers such securities.

In addition, the holders

have certain “piggy-back” registration rights with respect to registration statements filed subsequent to the completion of

the initial Business Combination and rights to require the Company to register for resale such securities pursuant to Rule 415 under the

Securities Act.

We are also obligated to file a registration statement for the (i) Equity Line Shares that we may issue to White Lion

pursuant to the Common Stock Purchase Agreement and White Lion RRA, (ii) up to 2,225,000 shares of Common Stock issuable upon exercise

of the Warrants and (iii) the shares issued or that will be issued pursuant to the Subscription Agreements.

The Company will bear the

expenses incurred in connection with the filing of any such registration statements.

The Company filed a registration statement on Form

S-1 with the SEC on October 10, 2023 and subsequently filed Amendment No.

1 and Amendment No.

2 thereto on November 13, 2023 and December

18, 2023, respectively, with respect to the Founder Shares, Private Shares, Equity Line Shares, the shares of Common Stock issuable upon

exercise of the Warrants and certain shares issuable under the Subscription Agreements.

The registration statement was declared effective

by the SEC on December 28, 2023.

Critical Accounting Policies

Our unaudited financial statements

accompanying notes have been prepared in accordance with U.S.

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.

unaudited financial statements accompanying notes have been prepared in accordance with U.S.

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

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 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.

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

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

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.

an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private

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.

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.

recognize 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.

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

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.

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.

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.

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

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 when they would apply to private companies.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis