Company: CERO
Filing Date: 2025-08-22
Form Type: 10-Q
Source: 0001213900-25-079898
Chunk: 152

Company: CERO THERAPEUTICS HOLDINGS, INC.
Filing Date: 2025-08-22
Form: 10-Q
Item: Item 8
Chunk 152
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 value $0.0001 per share (the “Series A Preferred Stock”), at a conversion price equal to $750 per share of Series A Preferred Stock.

11

The
Company issued, transferred from the Sponsor, or reserved for issuance an aggregate of 4,200 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.

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 have potentially been significant to Predecessor. The Merger was accounted for as an asset acquisition as substantially all
of the fair value was concentrated in IPR&D, an intangible asset. Predecessor’s assets (except for cash) and liabilities were
measured at fair value as of the transaction date. Consistent with authoritative guidance on the consolidation of a VIE that is not considered
a business, differences in the total purchase price and fair value of assets and liabilities are recorded as a gain or loss to the consolidated
statement of operations. The loss reflected below on the consolidation of the VIE is reflected “on the line” (defined below)
in the Company’s opening accumulated deficit.

Costs
incurred in obtaining technology licenses are charged to research and development expense as IPR&D if the technology licensed has
not reached technological feasibility and has no alternative future use. The IPR&D recorded at the Closing of $45.6 million is reflected
“on the line” in the Company’s opening accumulated deficit. To estimate the value of the