Company: CERO
Filing Date: 2025-04-15
Form Type: 10-K
Source: 0001213900-25-032134
Chunk: 38

Company: CERO THERAPEUTICS HOLDINGS, INC.
Filing Date: 2025-04-15
Form: 10-K
Item: Item 8
Chunk 38
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”). The
earning of these shares was accompanied by a forfeiture of 10,000 restricted shares of Common Stock held by the sponsor following receipt
of an acknowledgement notice by the Sponsor.

6.Each outstanding Predecessor option was converted into an option to
purchase a number of shares of Common Stock, equal to the Predecessor’s common stock underlying the option multiplied by the Exchange
Ratio factor of 0.064452, at an exercise price per share equal to the Predecessor option exercise price divided by the Exchange Ratio
factor.

7.Each warrant to purchase the Predecessor’s preferred stock was converted into a warrant to acquire
a number of shares of Common Stock obtained by dividing the warrant as-if-exercised liquidation preference by $1,000.00, with the exercise
price equal to the total Predecessor warrant exercise amount divided by the number of shares of Common Stock issuable upon exercise.

8.The Predecessor’s bridge notes automatically converted into shares of the Company’s Series
A Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), at a conversion price equal to $750 per share
of Series A Preferred Stock.

The Company issued, transferred
from the Sponsor, or reserved for issuance an aggregate of 84,000 shares of Common Stock to the holders of Predecessor common stock and
Predecessor preferred stock or reserved for issuance upon exercise of rollover (from Predecessor to Successor) options and warrants as
consideration in the Merger.

F-13

Asset Acquisition Method of Accounting -
The Merger was accounted for using the asset acquisition method in accordance with GAAP. Under this method of accounting, PBAX was considered
to be the accounting acquirer based on the terms of the Merger. Upon consummation of the Merger, the cash on hand resulted in the equity
at risk being considered insufficient for Predecessor to finance its activities without additional subordinated financial support. Therefore,
Predecessor was considered a Variable Interest Entity (“VIE”) and the primary beneficiary of Predecessor was treated as the
accounting acquirer. PBAX holds a variable interest in Predecessor and owns 100% of Predecessor’s equity. PBAX was considered the
primary beneficiary as it has the decision-making rights that gives it the power to direct the most significant activities. Also, PBAX
retained the obligation to absorb the losses and/or receive the benefits of Predecessor that could