Company: CERO
Filing Date: 2025-04-15
Form Type: 10-K
Source: 0001213900-25-032134
Chunk: 316

Company: CERO THERAPEUTICS HOLDINGS, INC.
Filing Date: 2025-04-15
Form: 10-K
Item: Item 1
Chunk 316
---
.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 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