UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-40877

CERO THERAPEUTICS HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware		81-4182129
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

201 Haskins Way, Suite 230, South San Francisco, CA 94080

(Address of Principal Executive Offices, including zip code)

(650) 407-2376

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	CERO	Nasdaq Capital Market
Warrants, each warrant exercisable for one one-hundredth of a share of Common Stock	CEROW	Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐ No ☒

As of May 14, 2025, there were 7,722,072 shares of Common Stock, par value $0.0001 per share, issued and outstanding.

CERO THERAPEUTICS HOLDINGS, INC.

FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2025

TABLE OF CONTENTS

		Page
PART 1 - FINANCIAL INFORMATION		1

Item 1.	Financial Statements (Unaudited)	1

	Condensed Consolidated Balance Sheets as of March 31, 2025 and December 31, 2024	1
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2025 (Successor), Period from February 14, 2024 through March 31, 2024 (Successor), and January 1, 2024 through February 13, 2024 (Predecessor)	2
	Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Deficit for the three months ended March 31, 2025 (Successor), Periods from February 14, 2024 through March 31, 2024 (Successor), and January 1, 2024 through February 13, 2024 (Predecessor)	3
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2025 (Successor), Period from February 14, 2024 through March 31, 2024 (Successor), and January 1, 2024 through February 13, 2024 (Predecessor)	4
	Notes to Condensed Consolidated Financial Statements (Unaudited)	5

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	30
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	39
Item 4.	Controls and Procedures	39

PART II - OTHER INFORMATION		40

Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3.	Defaults Upon Senior Securities	42
Item 4.	Mine Safety Disclosures	42
Item 5.	Other Information	42
Item 6.	Exhibits	42

SIGNATURES		44

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report, including statements regarding our future results of operations and financial position, business strategy, drug candidates, planned preclinical studies and clinical trials, results of preclinical studies, clinical trials, research and development (“R&D”) costs, regulatory approvals, timing and likelihood of success, as well as plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that are in some cases beyond our control and may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “would,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report include, but are not limited to, statements about:

●

our financial performance;

●

our ability to obtain additional cash and the sufficiency of our existing cash, cash equivalents and marketable securities to fund our future operating expenses and capital expenditure requirements, including the development and, if approved, commercialization of our product candidates;

●

our ability to realize the benefits expected from the business combination (the “Business Combination”) pursuant to the Business Combination Agreement, dated as of June 4, 2023 (as amended, the “Business Combination Agreement”), by and among CERo Therapeutics, Inc. (“Legacy CERo”), Phoenix Biotech Acquisition Corp. (“PBAX”) and PBCE Merger Sub, Inc. (“Merger Sub”);

●

the accuracy of our estimates regarding expenses, future revenue, capital requirements, and needs for additional financing;

●

the scope, progress, results and costs of developing CER-1236 or any other product candidates we may develop, and conducting preclinical studies and clinical trials;

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the timing and costs involved in obtaining and maintaining regulatory approval of CER-1236 or any other product candidates we may develop, and the timing or likelihood of regulatory filings and approvals, including our expectation to seek special designations or accelerated approvals for our drug candidates for various indications;

●

current and future agreements with third parties in connection with the development and commercialization of CER-1236 or any other future product candidate;

●

our ability to advance product candidates into and successfully complete clinical trials;

●

the ability of our clinical trials to demonstrate the safety and efficacy of CER-1236 and any other product candidates we may develop, and other positive results;

●

the size and growth potential of the markets for our product candidates, and our ability to serve those markets;

●

our plans relating to the commercialization of CER-1236 and any other product candidates we may develop, if approved, including the geographic areas of focus and our ability to grow a sales team;

●

the success of competing drugs, therapies or other products that are or may become available;

●

developments relating to our competitors and our industry, including competing product candidates and therapies;

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our plans relating to the further development and manufacturing of CER-1236 and any other product candidates we may develop, including additional indications that we may pursue for CER-1236 or other product candidates;

●

existing regulations and regulatory developments in the United States and other jurisdictions;

●

our potential and ability to successfully manufacture and supply CER-1236 and any other product candidates we may develop for clinical trials and for commercial use, if approved;

●

the rate and degree of market acceptance of CER-1236 and any other product candidates we may develop, as well as the pricing and reimbursement of CER-1236 and any other product candidates we may develop, if approved;

●

our expectations regarding our ability to obtain, maintain, protect and enforce intellectual property protection for CER-1236 and for any other product candidate;

●

our ability to operate our business without infringing, misappropriating or otherwise violating the intellectual property rights of third parties;

●

our ability to realize the anticipated benefits of any strategic transactions;

iii

●

our ability to attract and retain the continued service of our key personnel and to identify, hire, and then retain additional qualified personnel and our ability to attract additional collaborators with development, regulatory and commercialization expertise;

●

our ability to maintain proper and effective internal controls;

●

the ability to obtain or maintain the listing of our Common Stock and public warrants on the NASDAQ Stock Market (“Nasdaq”);

●

the impact of macroeconomic conditions and geopolitical turmoil on our business and operations, including interest rates, inflationary pressures, capital market disruptions, changes in governmental agencies, international tariffs, trade protection measures, economic sanctions and economic slowdowns or recessions;

●

our expectations regarding the period during which we will qualify as an emerging growth company under the Jumpstart Our Business Startups Act of 2012 and as a smaller reporting company under the federal securities laws; and

●

our anticipated use of our existing cash, cash equivalents and marketable securities.

We have based these forward-looking statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends that we believe may affect our business, financial condition, results of operations and prospects, and these forward-looking statements are not guarantees of future performance or development. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of risks, uncertainties and assumptions described in “Risk Factors” and elsewhere in this Quarterly Report. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein until after we distribute this Quarterly Report, whether as a result of any new information, future events or otherwise.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely upon these statements.

This Quarterly Report includes trademarks, tradenames and service marks that are the property of other organizations. Solely for convenience, trademarks and tradenames referred to in this Quarterly Report appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or that the applicable owner will not assert its rights, to these trademarks and tradenames.

SELECTED DEFINITIONS

As used in this Quarterly Report, unless otherwise noted or the context otherwise requires, references to the following capitalized terms have the meanings set forth below:

“Arena” refers to Arena Business Solutions Global SPC II, Ltd. on behalf of and for the account of Segregated Portfolio #13 – SPC #13.

“Board” refers to the board of directors of CERo.

“Business Combination” or “Merger” refers to the transactions contemplated by the Business Combination Agreement, including the merger between Merger Sub and Legacy CERo.

“Business Combination Agreement” refers to the Business Combination Agreement, dated as of June 4, 2023, as amended by Amendment No. 1, dated February 5, 2024 and Amendment No. 2, dated February 13, 2024, by and between PBAX, Merger Sub and Legacy CERo.

“Bylaws” refers to the Amended and Restated Bylaws of CERo.

“Charter” refers to CERo’s Second Amended and Restated Certificate of Incorporation, as filed with the Secretary of the State of Delaware February 14, 2024.

“Class A Common Stock” refers to the CERo Class A common stock, par value $0.0001 per share.

“Closing” refers to the closing of the Business Combination.

“Common Stock” refers to the Class A common stock, par value $0.0001 per share, of CERo.

“Common Warrants” refers to the Public Warrants, Private Placement Warrants, the Conversion Warrants, the Series A Warrants, the Series C Warrants, the December 2024 Common Warrants, the January 2025 Common Warrants, the February 2025 Common Warrants and the Pre-Funded Warrants.

“Conversion Warrants” refer to the warrants initially issued by CERo Therapeutics, Inc. and converted into warrants to purchase Common Stock in connection with the Business Combination.

“December 2024 Common Warrants” refer to the warrants to purchase shares of Common Stock, at a current exercise price of $5.61 per share, issued by the Company in a private placement on December 23, 2024.

“Earnout Shares” refer to the Primary Earnout Shares, the Secondary Earnout Shares and the Tertiary Earnout Shares, collectively.

“February 2025 Common Warrants” refer to the warrants to purchase shares of Common Stock, at a current exercise price of $1.96 per share, issued by the Company in a public offering on February 7, 2025.

“First PIPE Financing” refers to the private placement pursuant to which we issued and sold, and certain investors purchased, shares of Series A Preferred Stock, the Series A Warrants and Preferred Warrants, on the terms and conditions set forth in the First Securities Purchase Agreement.

“First PIPE Registration Rights Agreement” refers to the Registration Rights Agreement, dated as of February 14, 2024, by and between CERo and certain investors.

“First Securities Purchase Agreement” refers to the Amended and Restated Securities Purchase Agreement, dated as of February 14, 2024, by and among PBAX, Legacy CERo and certain investors, pursuant to which CERo agreed to issue and sell 10,089 shares of Series A Preferred Stock, 6,127 Series A Warrants and 2,500 Preferred Warrants.

“Fourth PIPE Financing” refers to the private placement pursuant to which we issued and sold, and certain investors purchased, shares of Series D Preferred Stock, on the terms and conditions set forth in the Fourth Securities Purchase Agreement.

“Fourth PIPE Registration Rights Agreement” refers to the Registration Rights Agreement, dated as of April 22, 2025, by and between CERo and certain investors.

“Fourth Securities Purchase Agreement” refers to the Securities Purchase Agreement, dated as of April 21, 2025, by and among CERo and certain investors, pursuant to which CERo agreed to issue and sell 6,250 shares of Series D Preferred Stock.

“Initial Public Offering” refers to the initial public offering of PBAX, which closed on October 8, 2021.

“January 2025 Common Warrants” refer to the warrants to purchase shares of Common Stock, at a current exercise price of $5.82 per share, issued by the Company in a private placement on January 6, 2025.

“Keystone” refers to Keystone Capital Partners, LLC.

“Legacy CERo” refers to CERo Therapeutics, Inc.

“Legacy CERo common stock” refers to the common stock, par value $0.0001 per share, of Legacy CERo.

“Legacy CERo preferred stock” refers to the preferred stock, par value $0.0001 per share, of Legacy CERo.

“Legacy CERo warrants” refers to the warrants to purchase shares of Legacy CERo preferred stock.

“Merger Sub” refers to PBCE Merger Sub, Inc., a Delaware corporation.

“New Keystone Purchase Agreement” refers to the Common Stock Purchase Agreement, dated as of November 8, 2024, by and between CERo and Keystone.

“Old Keystone Purchase Agreement” refers to the Common Stock Purchase Agreement, dated as of February 14, 2024, by and between PBAX and Keystone.

“PIPE Financings” refers to the First PIPE Financing, the Second PIPE Financing, the Third PIPE Financing and the Fourth PIPE Financing.

“PIPE Registration Rights Agreement” refers to the First PIPE Registration Rights Agreement, the Second PIPE Registration Rights Agreement, the Third PIPE Registration Rights Agreement and the Fourth PIPE Registration Rights Agreement.

“Pre-Funded Warrants” refer to the warrants to purchase shares of Common Stock, at an exercise price of $0.0001 per Share, issued in a public offering on February 7, 2025.

“Preferred Stock” refers to the shares of Series A, Series B, Series C, and Series D Preferred Stock, par value $0.0001 per share, of CERo.

“Preferred Shares” refer to the shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock issued in the PIPE Financings, including the Warrant Preferred Shares.

“Preferred Warrants” refer to warrants to purchase shares of Series A Preferred Stock.

“Primary Earnout Shares” refer to the 12,000 shares of Common Stock issued to the holders of Legacy CERo common stock and Legacy CERo preferred stock in connection with the Business Combination, 10,000 of which are subject to vesting upon the achievement of certain stock price-based earnout targets and 2,000 of which are subject to vesting upon a change of control, respectively.

“Private Placement Warrants” refer to private placement warrants to purchase shares of Common Stock, at an exercise price of $1,150.00 per share, that were originally sold in a private placement concurrently with the Initial Public Offering.

“Public Warrants” refer to the warrants to purchase shares of Common Stock, at an exercise price of $1,150.00 per share, that were originally issued in the Initial Public Offering.

“Reverse Stock Split” refers to the Company’s reverse stock split that became effective at 12:01 a.m. Eastern time on January 8, 2025, pursuant to which each 100 shares of Common Stock outstanding immediately prior thereto was converted into 1 share of Common Stock outstanding immediately thereafter.

“Rollover Warrants” refer to warrants to purchase shares of Common Stock, at an exercise price of $1,000.00 per share, that were converted from Legacy CERo warrants in connection with the Business Combination.

vii

“SEC” refers to the U.S. Securities and Exchange Commission.

“Secondary Earnout Shares” refer to the 8,750 shares of Common Stock issued to the holders of Legacy CERo common stock and Legacy CERo preferred stock in connection with the Business Combination, which became fully vested at Closing.

“Second PIPE Financing” refers to the private placement pursuant to which we issued and sold, and the investors purchased, shares of Series B Preferred Stock, on the terms and conditions set forth in the Second Securities Purchase Agreement.

“Second PIPE Registration Rights Agreement” refers to the Registration Rights Agreement, dated as of March 29, 2024, by and between CERo and certain investors.

“Second Securities Purchase Agreement” refers to the Securities Purchase Agreement, dated as of March 29, 2024, by and among CERo and certain investors, pursuant to which CERo agreed to issue and sell 626 shares of Series B Preferred Stock.

“Series A Preferred Stock” refers to the Series A convertible preferred stock, $0.0001 par value per share, of CERo.

“Series A Warrants” refers to warrants to purchase Common Stock, at a current exercise price of $139.00 per share, sold to certain investors pursuant to the First Securities Purchase Agreement.

“Series B Preferred Stock” refers to the Series B convertible preferred stock, $0.0001 par value per share, of CERo.

“Series C Preferred Stock” refers to the Series C convertible preferred stock, $0.0001 par value per share, of CERo.

“Series C Warrants” refers to warrants to purchase shares of Common Stock, at a current exercise price of $0.04 per share, sold to certain investors pursuant to the Third Securities Purchase Agreement.

“Series D Preferred Stock” refers to the Series D convertible preferred stock, $0.0001 par value per share, of CERo.

“Sponsor” refers to Phoenix Biotech Sponsor, LLC, a Delaware limited liability company.

“Tertiary Earnout Shares” refer to the 10,000 shares of Common Stock issued to the holders of Legacy CERo common stock and Legacy CERo preferred stock in connection with the Business Combination, which became fully vested upon the achievement of certain regulatory milestone-based earnout targets.

“Third PIPE Financing” refers to the private placement pursuant to which we issued and sold, and certain investors purchased, shares of Series C Preferred Stock, on the terms and conditions set forth in the Third Securities Purchase Agreement.

“Third PIPE Registration Rights Agreement” refers to the Registration Rights Agreement, dated as of September 26, 2024, by and between CERo and certain investors.

“Third Securities Purchase Agreement” refers to the Securities Purchase Agreement, dated as of September 25, 2024, by and among CERo and certain investors, pursuant to which CERo agreed to issue and sell 2,853 shares of Series C Preferred Stock and the Series C Warrants to purchase 81,753 shares of Common Stock.

“Warrant Preferred Shares” refer to the shares of Preferred Stock underlying the Preferred Warrants.

“Warrants” refer to the Rollover Warrants, the Private Placement Warrants, the Series A Warrants, the Series C Warrants, the December 2024 Common Warrants, the January 2025 Common Warrants, the Public Warrants, the February 2025 Common Warrants and the Pre-Funded Warrants.

viii

PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements

CERO THERAPEUTICS HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
	2025			2024
	(Unaudited)
ASSETS

Current assets:
Cash, restricted cash, and cash equivalents	$	5,203,537		$	3,327,060
Prepaid expenses and other current assets		564,464			274,749
Deferred offering costs		-			112,232
Total current assets		5,768,001			3,714,041

Deferred offering costs, net of current portion		500,000			500,000
Operating lease right-of-use assets		1,271,186			1,464,367
Property and equipment, net		452,227			528,521
Total assets	$	7,991,414		$	6,206,929

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current liabilities:
Accounts payable	$	6,379,056		$	4,507,318
Accrued liabilities		469,659			1,913,175
Operating lease liability		905,005			876,392
Earnout liability		20,000			20,000
Deemed dividend – common stock liability, 13,835 shares		85,500			85,500
Total current liabilities		7,859,220			7,402,385


Operating lease liability, net of current portion		461,580			699,107
Total liabilities		8,320,800			8,101,492

Commitments and contingencies

Stockholders’ deficit:
Series C convertible preferred stock, $0.0001 par value; 2,853 shares authorized; 2,537 and 2,853 issued and outstanding at March 31, 2025 and December 31, 2024, respectively; liquidation preference of $2,537,000 at March 31, 2025		982,143			1,249,999
Series A convertible preferred stock, $0.0001 par value; 12,580 shares authorized; 1,429 and 1,894 issued and outstanding at March 31, 2025 and December 31, 2024, respectively; liquidation preference of $1,429,000 at March 31, 2025		1,287,315			1,708,396
Series B convertible preferred stock, $0.0001 par value; 626 shares authorized; 198 and 273 issued and outstanding at March 31, 2025 and December 31, 2024, respectively; liquidation preference of $198,000 at March 31, 2025		158,147			218,051
Class A common stock; $0.0001 par value; 1,000,000,000 shares authorized; 5,169,723 and 2,415,883 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively		517			242
Additional paid-in capital		73,345,026			67,142,046
Stock subscription receivable		(78,750	)		(1,295,444	)
Accumulated deficit		(76,023,784	)		(70,917,853	)
Total stockholders’ deficit		(329,386	)		(1,894,563	)
Total liabilities and stockholders’ deficit	$	7,991,414		$	6,206,929

See accompanying notes to the condensed consolidated financial statements

CERO THERAPEUTICS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months Ended March 31, 2025			For the Period from February 14, 2024 through March 31, 2024			For the Period from January 1, 2024 through February 13, 2024
	(Successor)			(Successor)			(Predecessor)
Operating expenses:
Research and development	$	2,907,827		$	904,015		$	764,192
General and administrative		2,042,704			2,750,922			132,941
Total operating expenses		4,950,531			3,654,937			897,133
Loss from operations		(4,950,531	)		(3,654,937	)		(897,133	)

Other income (expense):
Gain from settlement of liabilities with vendors		-			141,888			-
Change in fair value of earnout liability		-			1,800,000			320,117
Share-based inducement expense		(156,250	)		-			-
Interest income (expense), net		850			(14,434	)		4,805

Total other income (expense), net		(155,400	)		1,927,454			324,922
Net loss		(5,105,931	)		(1,727,483	)		(572,211	)
Deemed dividends of Series A, B and C Preferred Stock		(264,144	)		-			-
Deemed dividends related to Series C Common Warrants		(84,083	)		-			-
Net loss attributable to common shareholders	$	(5,454,158	)	$	(1,727,483	)	$	(572,211	)

Net loss per common share:
Basic and diluted	$	(1.59	)	$	(12.24	)	$	(97.90	)
Weighted average common shares outstanding:
Basic and diluted		3,427,616			141,125			5,845

See accompanying notes to the condensed consolidated financial statements

Reflects a 1-for-100 reverse stock split effective January 8, 2025

CERO THERAPEUTICS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT

(Unaudited)

	Convertible Preferred Stock																		Series A Common				Additional			Stock						Total
	Series A						Series B						Series C						Stock				Paid-in			Subscriptions			Accumulated			Stockholders’
	Shares			Amount			Shares			Amount			Shares			Amount			Shares		Amount		Capital			Receivable			Deficit			Deficit
Balance at December 31, 2024 (Successor)		1,894		$	1,708,396			273		$	218,051			2,853		$	1,249,999			2,415,883	$	242	$	67,142,046		$	(1,295,444	)	$	(70,917,853	)	$	(1,894,563	)
Issuance of shares of Series A Preferred Stock upon exercise of Series A Preferred Warrants		625			500,000			-			-			-			-			-		-		(500,000	)		500,000			-			500,000
Sale of common stock		-			-			-			-			-			-			300,000		30		587,970			-			-			588,000
Sale of pre-funded warrants, net of issuance costs of $839,004		-			-			-			-			-			-			-		-		3,572,795			-			-			3,572,795
Exercise of pre-funded warrants		-			-			-			-			-			-			1,824,280		182		-									182
Purchases of shares of Common Stock under Keystone ELOC		-			-			-			-			-			-			290,618		29		1,227,212			-			-			1,227,241
Collection of stock subscriptions receivable related to prior Keystone ELOC purchases					-			-			-			-			-			-		-		-			716,694			-			716,694
Issuance of shares of Common Stock upon conversion of Series A Preferred Stock		(1,090	)		(921,081	)		-			-			-			-			288,941		29		921,052			-			-			-
Issuance of shares of Common Stock upon conversion of Series B Preferred Stock		-			-			(75	)		(59,904	)		-			-			50,001		5		59,899			-			-			-
Redemption of Series C Preferred Stock		-			-			-			-			(316	)		(267,856	)		-		-		(127,144	)		-			-			(395,000	)
Share-based inducement expense related to conversion of Series A Preferred Stock		-			-			-			-			-			-			-		-		156,250			-			-			156,250
Stock-based compensation		-			-			-			-			-			-			-		-		304,946			-			-			304,946
Net loss		-			-			-			-			-			-			-		-		-			-			(5,105,931	)		(5,105,931	)
Balance at March 31, 2025 (Successor)		1,429		$	1,287,315			198		$	158,147			2,537		$	982,143			5,169,723	$	517	$	73,345,026		$	(78,750	)	$	(76,023,784	)	$	(329,386	)

	Convertible Preferred Stock												Series A Common				Additional		Stock						Total
	Series A				Series B				Series C				Stock				Paid-in		Subscriptions			Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Capital		Receivable			Deficit			Deficit
Balance at February 14, 2024 (Successor)		10,089	$	8,937,852		-	$	-		-	$	-		145,318	$	15	$	53,899,871	$	(2,000,000	)	$	(63,185,641	)	$	(2,347,903	)
Issuance of Series B shares sold to investors		-		-		626		500,000		-		-		-		-		-		(500,000	)		-			-
Stock-based compensation		-		-		-		-		-		-		-		-		96,289		-			-			96,289
Net loss		-		-		-		-		-		-		-		-		-		-			(1,727,483	)		(1,727,483	)
Balance at March 31, 2024 (Successor)		10,089	$	8,937,852		626	$	500,000		-	$	-		145,318	$	15	$	53,996,160	$	(2,500,000	)	$	(64,913,124	)	$	(3,979,097	)

	Convertible Preferred Stock												Additional					Total
	Series Seed				Series A				Common Stock				Paid-in		Accumulated			Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Deficit
Balance at December 31, 2023 (Predecessor)		5,155,703	$	4,077,560		22,764,764	$	38,023,784		5,845	$	1	$	1,032,125	$	(43,089,821	)	$	(42,057,695	)
Stock based compensation expense		-		-		-		-		-		-		4,431		-			4,431
Net loss		-		-		-		-		-		-		-		(572,211	)		(572,211	)
Balance at February 13, 2024 (Predecessor)		5,155,703	$	4,077,560		22,764,764	$	38,023,784		5,845	$	1	$	1,036,556	$	(43,662,032	)	$	(42,625,475	)

See accompanying notes to the condensed consolidated financial statements

Reflects a 1-for-100 reverse stock split effective January 8, 2025

CERO THERAPEUTICS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(Unaudited)

	For the Three Months ended March 31, 2025			For the Period from February 14, 2024 through March 31, 2024			For the Period from January 1, 2024 through February 13, 2024
	(Successor)			(Successor)			(Predecessor)
Cash flows from operating activities:
Net loss	$	(5,105,931	)	$	(1,727,483	)	$	(572,211	)
Adjustments to reconcile net loss to net cash used in operating activities:
Gain from settlement of liabilities with vendors		-			(141,888	)		-
Depreciation expense		76,294			76,287			37,356
Stock-based compensation		304,946			96,289			4,431
Amortization of right-to-use operating lease asset		193,181			58,659			115,859
Share-based inducement expense		156,250			-			-
Amortization of debt discount		-			-			(1,875	)
Gain on revaluation of earnout and derivative liabilities		-			(1,800,000	)		(320,117	)
Change in assets and liabilities:
Prepaid expenses and other current assets		(289,715	)		(670,064	)		142,687
Accounts payable		727,912			(414,916	)		128,429
Accrued liabilities		(299,690	)		141,982			(50,370	)
Operating lease liability		(208,914	)		(61,524	)		(121,589	)
Net cash used in operating activities		(4,445,667	)		(4,442,658	)		(637,400	)
Cash flows from financing activities:
Proceeds from issuance of Series A Preferred Stock, net of issuance costs		-			6,755,698			-
Advances from shareholder		-			13,731			-
Payment of sponsor loans		-			(19,715	)		-
Proceeds from exercise of Series A Preferred Warrants		500,000			-			-
Proceeds from short term borrowings, net		-			408,052			-
Proceeds from share purchases under ELOC		1,227,241			-			-
Proceeds from collection of stock subscriptions receivable		716,694			-			-
Proceeds received from sale of common stock		588,000			-			-
Proceeds received from sale of pre-funded warrants, net of issuance costs		3,685,027			-			-
Proceeds from exercise of pre-funded warrants		182
Cash redemption of Series C Preferred Stock		(395,000	)		-			-
Net cash provided by financing activities		6,322,144			7,157,766			-

Net increase (decrease) in cash and cash equivalents		1,876,477			2,715,108			(637,400	)

Cash, restricted cash and cash equivalents at beginning of period		3,327,060			1,877,995			1,601,255

Cash, restricted cash and cash equivalents at end of period	$	5,203,537		$	4,593,103		$	963,855

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash and cash equivalents	$	5,128,781		$	4,513,347		$	963,855
Restricted cash		74,756			79,756			-
Cash, restricted cash and cash equivalents	$	5,203,537		$	4,593,103		$	963,855

NON-CASH FINANCING ACTIVITIES:
Issuance of common shares to Keystone Capital LLC for equity line of credit	$	-			633,345		$	-
Issuance of Series B shares under subscription agreements	$	-		$	500,000		$	-
Conversion of Series A and Series B preferred stock to common stock	$	980,985		$	-		$	-
Reclassification of deferred offering costs to additional paid-in capital	$	112,232		$	-		$	-
Reclassification of accrued expenses to accounts payable	$	1,143,826		$	-		$	-

See accompanying notes to the condensed consolidated financial statements

CERO THERAPEUTICS HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1 – ORGANIZATION AND DESCRIPTION OF THE BUSINESS

Nature of Operations – CERo Therapeutics Holdings, Inc. (NASDAQ: CERO) (“CERo”, “Successor” or the “Company”), F/K/A Phoenix Biotech Acquisition Corp. (“PBAX”) was incorporated in Delaware on June 8, 2021. PBAX was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses (a “business combination”).

The Company is an innovative immunotherapy company advancing the development of next generation engineered T cell therapeutics for the treatment of cancer. The Company’s proprietary approach to T cell engineering, which enables it to integrate certain desirable characteristics of both innate and adaptive immunity into a single therapeutic construct, is designed to engage the body’s full immune repertoire to achieve optimized cancer therapy. The Company has not yet begun clinical development or product commercialization. The Company’s efforts will focus on continued product development, including clinical development, to support regulatory approval to commercialize and subsequent product commercialization.

In November 2024, the U.S. Food and Drug Administration (“FDA”) cleared the Company’s Investigational New Drug Application for Phase 1 clinical trials of its lead compound, CER-1236, in acute myelogenous leukemia.

Reverse Stock Split – On January 8, 2025, the Company effected a reverse stock split of our shares of common stock at a ratio of 1-for-100 (the “Reverse Stock Split”). The Company’s common stock continued to trade on Nasdaq on a post-split basis under the Company’s existing trading symbol, “CERO”.

All of the Company’s historical share and per share information related to issued and outstanding common stock and outstanding options and warrants exercisable for common stock in these financial statements have been adjusted, on a retroactive basis, to reflect the Reverse Stock Split.

Business Combination Agreement - On June 6, 2023, CERo Therapeutics, Inc. (“Predecessor”), which was incorporated in Delaware on September 23, 2016, and based in South San Francisco, California, entered into a Business Combination Agreement and Plan of Reorganization (the “BCA”) with PBCE Merger Sub, Inc., a wholly-owned subsidiary of PBAX, and PBAX, with the surviving operating entity being named CERo Therapeutics Holdings, Inc., and such transaction, the “Business Combination” or “Merger”.

Going concern – The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company’s ability to continue as a going concern is dependent on its ability to raise additional capital to fund its research and development (“R&D”) activities and meet its obligations on a timely basis. As of March 31, 2025, the Company reported $5.1 million of cash and cash equivalents, with an accumulated deficit of $76.0 million. On February 5, 2025, we entered into a securities purchase agreement (the “SPA”), with participation from a member of the Company’s board of directors and a single institutional investor, for the purchase and sale of (i) 2,551,020 shares of our common stock or common stock equivalents in lieu thereof; and (ii) common warrants to purchase up to 2,551,020 shares of common stock, at a combined public offering price of $1.96 per share and Warrant. In connection with this offering, we received net proceeds of approximately $4.2 million. Additionally, during the three months ended March 31, 2025, we received net proceeds from the exercise of the remaining Series A Preferred Warrants, the collection of subscriptions receivable and ELOC fundings of approximately $2.4 million. Additional funds are necessary to maintain current operations and to continue R&D activities. However, there can be no assurance that sufficient funding will be available to allow the Company to successfully continue its R&D activities and planned regulatory filings with the FDA. If the Company is unable to obtain the necessary funds, significant reductions in spending and the delay or cancellation of planned activities may be necessary. These actions would have a material adverse effect on the Company’s business, results of operations, and prospects. These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year from the date these financial statements are issued. These financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

Risks and uncertainties – The Company is subject to all of the risks inherent in an early-stage biotechnology company. These risks include, but are not limited to, limited management resources, intense competition, and dependence upon the availability of cash to sustain operations. The Company’s operating results may be materially affected by the foregoing factors.

The Company’s research also requires approvals from the FDA prior to beginning clinical trials and prior to product commercialization. There can be no assurance that the Company’s current ongoing research and future clinical development will result in the granting of these required approvals. If the Company is denied such approvals or such approvals are substantially delayed, they could have a material adverse effect upon the Company’s future financial results and cash flows.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation – The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the applicable rules and regulations of the SEC. In the opinion of management, the accompanying consolidated financial statements include all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating results and cash flows for the periods presented.

On February 14, 2024, the Company completed the Merger with CERo Therapeutics, Inc., with CERo Therapeutics, Inc. surviving the Merger as a wholly-owned subsidiary of the Company, the accounting acquirer. The transaction was accounted for as a forward merger asset acquisition.

Unless the context otherwise requires, the “Company,” for periods prior to the Closing, refers to CERo Therapeutics, Inc. (“Predecessor”), and for the periods after the Closing, refers to CERo Therapeutics Holdings, Inc. (“Successor” or the “Company”). As a result of the Merger, the results of operations, financial position and cash flows of the Predecessor and the Company are not directly comparable. CERo Therapeutics, Inc. was deemed to be the Predecessor entity. Accordingly, the historical financial statements of CERo Therapeutics, Inc. became the historical financial statements of the combined Company, upon the consummation of the Merger. As a result, the financial statements included in this report reflect (i) the historical operating results of CERo Therapeutics, Inc. prior to the Merger and (ii) the combined results of the Company, CERo Therapeutics Holdings, Inc., following the Merger. The accompanying unaudited condensed consolidated financial statements include a Predecessor period, which includes the period from January 1, 2024 to February 13, 2024 concurrent with the Merger, and a Successor period from February 14, 2024 through March 31, 2024 and for the three months ended March 31, 2025. A black line between the Successor and Predecessor periods has been placed in the unaudited condensed consolidated financial statements and in the tables to the notes to the condensed consolidated financial statements to highlight the lack of comparability between these two periods.

Use of estimates – The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of expenses incurred during the reporting period. Items subject to such estimates and assumptions include the estimates of the fair values of convertible preferred stock, common stock, and preferred stock warrant liability, stock-based compensation expense, the present value of right-to-use assets and lease liabilities, the valuation of earnout liability, and the valuation allowance associated with deferred tax assets. Actual results could differ from those estimates.

Cash, restricted cash, and cash equivalents – The Company considers all highly liquid investments with an original maturity from the date of purchase of three months or less to be cash equivalents. As of March 31, 2025 and December 31, 2024, cash and cash equivalents consist of cash deposited with banks, including a money market sweep account, and restricted cash of $74,756 and $74,756, respectively, held on account by a financial institution as collateral for a demand letter of credit issued as a real estate security deposit.

Concentration of credit risk – Financial instruments that potentially subject the Company to credit risk consist primarily of cash, restricted cash, and cash equivalents. The Company’s cash, restricted cash, and cash equivalents are on deposit with two financial institutions that management believe are of sufficiently high credit quality. Deposits at any of the Company’s financial institutions may, at times, exceed federal insured limits.

Property and equipment – Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets, generally three to five years or the remaining lease term for leasehold improvements, if shorter. Expenditures for repairs and maintenance are charged to expense as incurred. Upon disposition, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is reflected in the condensed consolidated statements of operations.

Impairment of long-lived assets – The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. When such an event occurs, management determines whether there has been an impairment by comparing the anticipated undiscounted future net cash flows to the related asset’s carrying value. If an asset is considered impaired, the asset is written down to fair value, which is determined based either on discounted cash flows or appraised value, depending on the nature of the asset. Through March 31, 2025, the Company has not experienced any impairment losses on its long-lived assets.

Leases – The Company determines if an arrangement contains a lease at inception. A lease is an operating or financing contract, or part of a contract, that conveys the right to control the use of an identified tangible asset for a period of time in exchange for consideration.

At lease inception, the Company recognizes a lease liability equal to the present value of the remaining lease payments, and a right of use asset equal to the lease liability, subject to certain adjustments, such as for lease incentives. In determining the present value of the lease payments, the Company uses its incremental borrowing rate, determined by estimating the Company’s applicable, fully collateralized borrowing rate, with adjustment as appropriate for lease term. The lease term at the lease commencement date is determined based on the non-cancellable period for which the Company has the right to use the underlying asset, together with any periods covered by an extension option if the Company is reasonably certain to exercise that option.

Right-of-use assets and obligations for leases with an initial term of 12 months or less are considered short term and are (a) not recognized in the balance sheet and (b) recognized as an expense on a straight-line basis over the lease term. The Company does not sublease any of its leased assets to third parties and the Company’s lease agreements do not contain any residual value guarantees or restrictive covenants.

The accounting for leases includes a number of reassessment and re-measurement requirements for lessees based on certain triggering events or impairment conditions. There were no impairment indicators identified in each of the three months periods ended March 31, 2025 and 2024, that would require impairment testing of the Company’s right-of-use assets.

Certain of the Company’s leases include variable lease costs to reimburse the lessor for real estate tax and insurance expenses, and certain non-lease components that transfer a distinct service to the Company, such as common area maintenance services. The Company has elected to separate the accounting for fixed lease components and variable and non-lease components for real estate and equipment leases. The variable lease costs are recorded on the condensed consolidated statement of operations as rent expense, within general and administrative expenses. The Company does not have any financing leases as of March 31, 2025 or December 31, 2024.

Derivative financial instruments – The Company evaluates financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are initially recorded at fair value on the grant date and re-valued at each reporting date, with changes in the fair value reported in the condensed consolidated statements of operations. Derivative assets and liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.

Preferred stock warrant liability – Warrant accounting requires liability classification of warrants when the warrants include a conditional obligation, once the warrant is exercised, that would require the Company to redeem its equity shares. Warrants are analyzed to determine whether the warrant is a freestanding instrument and if so, whether the warrant was issued in a transaction with other instrument(s). If a freestanding warrant is issued with other instruments in a single transaction, then the proceeds of the transaction are allocated first to the fair value of the warrant, with the remainder being allocated to the other instruments. Any warrants considered a liability are remeasured as of each reporting period end, with any changes in fair value recognized as interest and other income, net in the statement of operations. The Company has determined any warrant liability is a Level 3 instrument in the fair value measurements hierarchy. The Company has not included the effect of preferred stock warrants in the calculation of diluted loss per share since the inclusion of such warrants would be anti-dilutive. As of March 31, 2025 and December 31, 2024, there was no preferred stock warrant liability,

Earnout liability - As a result of the Merger in February 2024, the Company recognized an initial earnout liability of $4.9 million on the merger date. The earnout liability is measured using unobservable (Level 3) inputs and is included in current liabilities on the accompanying consolidated balance sheet. The Company estimated the fair value of the earnout liability by applying a Monte-Carlo simulation method using the Company’s projection of future operating results and the estimated probability of achievement of the earnout target metrics. The Monte-Carlo simulation is a generally accepted statistical technique used to generate a defined number of valuation paths in order to develop a reasonable estimate of the fair value of the earnout liability. The liability is remeasured to fair value using the Monte-Carlo simulation method at each reporting period, and the change in fair value is recognized in other income (expense) until the contingency is resolved. During the three months ended March 31, 2025 and 2024, the Company recorded a gain from change of fair value of the earnout liability of $0 and $1,800,000, respectively, which is included in other income (expense), net on the accompanying unaudited condensed consolidated statement of operations, respectively.

Fair value measurements – The Company’s assets and liabilities are carried at fair value. Fair value is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. In determining fair value, the assumptions that market participants would use in pricing an asset or liability (the inputs) are based on a tiered fair value hierarchy consisting of three levels, as follows:

Level 1

–

Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2

–

Inputs (other than quoted prices included in Level 1) that are either directly or indirectly observable for the asset or liability. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3

–

Unobservable inputs for which there is little or no market data and which require the Company to develop its own assumptions about how market participants would price the asset or liability. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

Carrying amounts of certain of the Company’s financial instruments, including cash, restricted cash, and cash equivalents, prepaid expenses and other current assets, accounts payable, accrued liabilities, and short-term notes payable approximate fair value due to their relatively short maturities.

Non-financial assets such as property and equipment and operating lease right-of-use assets are evaluated for impairment and adjusted to fair value using Level 3 inputs only when impairment is recognized. Fair values are considered Level 3 when management makes significant assumptions in developing a discounted cash flow model based upon a number of considerations including projections of revenues, earnings, and a discount rate. To date, the Company has not recorded any adjustments to fair value related to impairment on property and equipment or operating lease right-of-use assets. On March 31, 2025 and December 31, 2024, the fair value of the Company’s earnout liability (see Note 10 for details) was classified as follows:

	March 31, 2025
	Level 1		Level 2		Level 3		Total
Earnout liability	$	-	$	-	$	20,000	$	20,000

	December 31, 2024
	Level 1		Level 2		Level 3		Total
Earnout liability	$	-	$	-	$	20,000	$	20,000

The change in the fair value measurement using significant inputs (Level 3) is summarized below:

Preferred stock warrant liability (Predecessor):
Balance at December 31, 2023	$	320,117
Gain on revaluation of warrant liability		(320,117	)
Balance at February 14, 2024	$	-

Earnout liability (Successor):
Balance at February 14, 2024	$	4,900,000
Gain on revaluation of earnout liability		(1,800,000	)
Balance at March 31, 2024	$	3,100,000

Earnout liability (Successor):
Balance at December 31, 2024	$	20,000
Gain on revaluation of earnout liability		-
Balance at March 31, 2025	$	20,000

Research and development – R&D costs consist primarily of salaries and benefits, including stock-based compensation, occupancy, materials and supplies, contracted research, consulting arrangements, and other expenses incurred in the pursuit of the Company’s R&D programs. R&D costs are expensed as incurred.

Stock-based compensation – The Company periodically issues common stock and stock options to officers, directors, and consultants for services rendered. Stock-based compensation accounting requires the recognition of stock-based compensation expense, using a grant date fair value-based method, for costs related to all share-based payments including stock options and restricted stock awards granted to employees and non-employees. Companies are required to estimate the fair value of all share-based payment awards on the date of grant using an option pricing model, and the Company uses a Black-Scholes option pricing model (“Black-Scholes”) to estimate option award fair value. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment:

●

The Common Stock expected dividend yield assumption of 0.0% is based on the expectation of no dividend payouts to Common Stock.

●

The risk-free interest rate assumption is based on the U.S. Department of Treasury instruments whose term was most consistent with the expected life of the Company’s stock options.

●

The expected stock price volatility assumption was determined by examining the historical volatilities for industry peers, as the Company does not have sufficient public trading history for the Company’s Common Stock. The Company will continue to analyze the historical stock price volatility and expected term assumption as more historical price data for the Company’s Common Stock becomes available.

●

The expected lives of the Company’s stock options are estimated based on the type of award issued using approaches that do not rely on the historical data of the Company, as management has concluded there is insufficient data to provide a reasonable forward-looking estimate. The expected life of an incentive stock option is estimated using the simplified method described in Staff Accounting Bulletin Topic 14 – Share-Based Payment. All incentive stock options awarded by the Company have terms consistent with this approach, which is to calculate the weighted average midpoint between the vesting date of each vesting tranche and the termination date of the option. Non-qualified stock options are valued using the contractual life as the expected term.

The fair value of restricted stock awards is based upon the estimated share price of the common shares on the date of grant.

Forfeitures are accounted for as they occur. All options and restricted stock awards granted since inception are expensed on a straight-line basis over the requisite service period, which is usually the vesting period, or upon the completion of certain performance-based vesting terms. The related amounts are recognized in the consolidated statements of operations.

Income taxes – The Company accounts for income taxes under the liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

The Company follows tax accounting requirements for the recognition, measurement, presentation, and disclosure in the financial statements of any uncertain tax positions that have been taken or expected to be taken on a tax return. No liability related to uncertain tax positions is recorded in the financial statements. It is the Company’s policy to include penalties and interest expense related to income taxes as a component of income tax expense, as necessary. The Company has not recorded any interest or penalties associated with income tax. Tax years subsequent to 2021 are subject to examination by federal and state authorities.

Earnings per share – The Company reports both basic and diluted earnings per share. Basic earnings per share is calculated based on the weighted average number of shares of common stock outstanding and excludes the dilutive effect of convertible preferred stock, warrants for convertible preferred stock or common stock, stock options or any other type of convertible securities. Diluted earnings per share is calculated based on the weighted average number of shares of common stock outstanding and when the effect of stock options, warrants and other types of convertible securities is dilutive, they are included in the calculation. Dilutive securities are excluded from the diluted earnings per share calculation if their effect is anti-dilutive, such as in periods where the Company reports a net loss.

Segment reporting - Operating segments are defined as components of a business for which separate discrete financial information is available for evaluation by the chief operating decision maker in deciding how to allocate resources and assess performance. The Company operates as a single operating and reporting segment, reflecting our sole focus in developing next generation engineered T cell therapeutics for the treatment of cancer. Our Chief Executive Officer serves as the Chief Operating Decision Maker (CODM), responsible for assessing the Company’s performance and making resource allocation decisions. The CODM evaluates financial information on a consolidated basis, focusing on key metrics such as research and development expense, general and administrative expenses, and other income/expenses, which is reflected on the face of the Company’s consolidated statement of operations. The CODM allocates resources based on the Company’s available cash resources, forecasted cash flow, and expenditures on a consolidated basis, as well as an assessment of the probability of success of its research and development activities. Resource allocation decisions are informed by budgeted and forecasted expense information, along with actual expenses incurred to date. The measure of segment assets is reported on the condensed consolidated balance sheets as total assets. Disaggregated profit or loss information at the program or functional level is not regularly provided to or relied upon by the CODM, as our integrated operating model emphasizes shared resources and centralized decision-making.

Recently adopted accounting standards – In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which focuses on the rate reconciliation and income taxes paid. ASU No. 2023-09 requires a public business entity (PBE) to disclose, on an annual basis, a tabular rate reconciliation using both percentages and currency amounts, broken out into specified categories with certain reconciling items further broken out by nature and jurisdiction to the extent those items exceed a specified threshold. In addition, all entities are required to disclose income taxes paid, net of refunds received disaggregated by federal, state/local, and foreign and by jurisdiction if the amount is at least 5% of total income tax payments, net of refunds received. This pronouncement is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company adopted ASU 2023-09 on January 1, 2025. The adoption of this ASU had no impact on the Company’s consolidated financial position, results of operations, or cash flows.

Accounting standards not yet adopted – In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), which requires entities to provide more detailed disaggregation of expenses in the income statement, focusing on the nature of the expenses rather than their function. The new disclosures will require entities to separately present expenses for significant line items, including but not limited to, depreciation, amortization, and employee compensation. Entities will also be required to provide a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, disclose the total amount of selling expenses and, in annual reporting periods, provide a definition of what constitutes selling expenses. This pronouncement is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently assessing this ASU to determine the impact on its consolidated financial statements.

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the Company’s consolidated financial statements.

NOTE 3 – BUSINESS COMBINATION

Business Combination Agreement - On June 6, 2023, CERo Therapeutics, Inc. (“Predecessor”), which was incorporated in Delaware on September 23, 2016, and based in South San Francisco, California, entered into a Business Combination Agreement and Plan of Reorganization (the “BCA”) with PBCE Merger Sub, Inc., a wholly-owned subsidiary of PBAX, and PBAX, with the surviving operating entity being named CERo Therapeutics Holdings, Inc. (“Successor” or the “Company”), and such transaction, the “Business Combination” or “Merger”.

The Company is focused on genetically engineering human immune cells to fight cancer. The Predecessor focused on developing the CERo therapeutic platform and had not yet begun clinical development or product commercialization. The Company’s efforts will focus on continued product development, including clinical development, to support regulatory approval to commercialize and subsequent product commercialization.

The BCA was amended on February 5, 2024 and again on February 13, 2024. The Merger closed on February 14, 2024 (the “Closing”), at which time the following occurred:

The outstanding shares of Predecessor’s preferred stock were converted into 44,155 shares of Common Stock, par value $0.0001 per share (the “Common Stock”), valued at $21,635,926.

The outstanding shares of Predecessor’s common stock were converted into 5,845 shares of Common Stock, valued at $2,864,074.

Each holder of Predecessor’s common stock received a pro rata portion of up to 12,000 earnout shares of restricted Common Stock (the “BCA Earnout Shares”), valued at $5,880,000, 10,000 of which are subject to vesting upon the achievement of certain stock price-based earnout targets and 2,000 of which are subject to vesting upon a change of control, respectively.

Certain holders of Predecessor’s common stock received a pro rata portion of 8,750 earnout shares of Common Stock (the “Reallocation Shares”), valued at $4.29 million, which became fully vested upon the Closing.

Certain holders of Predecessor’s common stock and convertible bridge notes received a pro rata portion of 10,000 earnout shares (the “IND Earnout shares”) of restricted Common Stock, valued at $4,900,000, which vested when the Company filed an investigational new drug (“IND”) application with the Food and Drug Administration (“FDA”). 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.

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.

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.

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.

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 acquired IPR&D, the Company used the avoided cost method, which calculates a present value of a 45% return on research and development effort applied to research and development expenditures over the life of the Predecessor. The determination of the fair value requires management to make a significant estimate of the return on research and development expenditures. Changes in these assumptions could have a significant impact on the fair value of the IPR&D. The estimate of the return on research and development expenditures was based on multiple published studies analyzing actual returns of research and development expenditures.

The following is a summary of the purchase price calculation:

Number of shares of Common Stock		50,000
Multiplied by PBAX’s share price, as of the Closing	$	585.00
Total	$	29,250,000
Fair value of PBAX founder’s shares converted to shares of Common Stock and transferred to Predecessor stockholders	$	5,118,750
Fair value of contingent Common Stock consideration	$	12,870,000
Total Common Stock consideration	$	47,238,750
Assumed liabilities		3,311,153
Total purchase price	$	50,549,903

The allocation of the purchase price was as follows:

Cash	$	963,855
Net working capital deficit (excluding cash and cash equivalents)		(1,819,514	)
Fixed assets		929,346
Acquired in-process research and development		45,640,000
Net assets acquired		45,713,687
Loss on consolidation of VIE		4,836,216
Total purchase price	$	50,549,903

In connection with the Merger, the transactions that occurred concurrently with the closing date of the Merger were reflected “on the line”. “On the line” describes those transactions triggered by the consummation of the Merger that are not recognized in the consolidated financial statements of the Predecessor nor the Company as they are not directly attributable to either period but instead were contingent on the Merger. The opening cash balance in the consolidated statement of cash flow of $1.88 million consists of $0.92 million from PBAX and $0.96 million from Predecessor. The number of shares of Common Stock issued and amounts recorded on the line within stockholders’ deficit are reflected below to arrive at the opening consolidated balance sheet of the Company.

	Convertible
	Preferred Stock				Series A						Additional			Stock
	Series A				Common Stock						Paid-in			Subscription			Accumulated
	Shares		Amount		Shares			Amount			Capital			Receivable			Deficit			Total
PBAX Closing Equity as of February 13, 2024		-	$	-		54,812		$	6		$	541		$	-		$	(12,709,426	)	$	(12,708,879	)
Forfeiture of founders shares		-		-		(8,750	)		(1	)		1			-			-			-
Adjusted shares outstanding		-		-		46,062			5			542			-			(12,709,426	)		(12,708,879	)
Shares issued as consideration in the Merger		-		-		80,750			8			47,238,742			-			-			47,238,750
Loss on VIE consolidation		-		-		-			-			-			-			(4,836,216	)		(4,836,216	)
Expense IPR&D		-		-		-			-			-			-			(45,640,000	)		(45,640,000	)
Reclassification of public shares		-		-		820			-			911,358			-			-			911,358
Issuance of common stock as payment to vendors		-		-		16,495			2			3,182,548			-			-			3,182,550
Elimination of deferred underwriting fees		-		-		-			-			5,690,000			-			-			5,690,000
Reclassification of earnout liability		-		-		-			-			(4,900,000	)		-			-			(4,900,000	)
Conversion of CERo bridge notes and accrued interest into Series A preferred stock		630		627,154		-			-			-			-			-			627,154
Conversion of working capital loan into Series A preferred stock		1,605		1,555,000		-			-			-			-			-			1,555,000
Issuance of Series A shares sold to investors, net		7,854		6,755,698		-			-			(856,663	)		-			-			5,899,035
Issuance of Series A Preferred Warrants		-		-		-			-			2,000,000			(2,000,000	)		-			-
Issuance of common shares to Keystone Capital LLC for equity line of credit		-		-		1,191			-			633,345			-			-			633,345
Opening Equity at February 14, 2024 (Successor)		10,089	$	8,937,852		145,318		$	15		$	53,899,871		$	(2,000,000	)	$	(63,185,641	)	$	(2,347,903	)

NOTE 4 – NET LOSS PER SHARE OF COMMON STOCK

The accounting standards require the presentation of both basic and diluted earnings per share on the face of the statements of operations. The Company’s basic net loss per share is computed by dividing net loss attributable to common shareholders by the weighted average number of shares of common stock outstanding for the period. If there are dilutive securities, diluted income per share is computed by including common stock equivalents which includes shares issuable upon the exercise of stock options into shares of common stock, exercise of preferred warrants into shares of preferred stock, and conversion of preferred stock into shares of common stock, net of any shares assumed to have been purchased with the proceeds, using the treasury stock method. In periods for which the Company reports a net loss, the common stock equivalents are not included, as they would be anti-dilutive.

The following table summarizes the number of shares of Common Stock issuable upon conversion or exercise, as applicable, of convertible securities, stock options, and warrants that were not included in the calculation of diluted net loss per share because such shares are anti-dilutive:

	For the three months ended March 31,		For the period from February 14, 2024 through March 31,		For the period from January 1, 2024 through February 14,
	2025		2024		2024
	(Successor)		(Successor)		(Predecessor)
Conversion of convertible preferred stock issued and outstanding		2,568,240		10,541		17,995
Conversion of convertible preferred stock underlying convertible preferred stock warrants		-		2,374		1,192
Exercise of warrants for common stock		3,405,479		101,602		-
Common stock underlying outstanding options (2024 Plan)		471,199		46,194		504
		6,444,918		160,711		19,691

Restricted common stock can be issued to directors, executives or employees of the Company and are subject to time-based vesting. These potential shares are excluded from the computation of basic loss per share as these shares are not considered outstanding until vested. No unvested restricted common stock awards were issued or outstanding during the three months ended March 31, 2025 or 2024.

NOTE 5 – PROPERTY AND EQUIPMENT

Property and equipment, net, consisted of the following as of March 31, 2025 and December 31, 2024:

	March 31,			December 31,
	2025			2024
	(Successor)			(Successor)
Laboratory equipment	$	2,507,839		$	2,507,839
Computers		38,323			38,323
Furniture		8,429			8,429
Total cost		2,554,591			2,554,591
Less: accumulated depreciation		(2,102,364	)		(2,026,070	)
Property and equipment, net	$	452,227		$	528,521

Depreciation expense for the three months ended March 31, 2025 was $76,294 and for period from February 14, 2024 through March 31, 2024 for Successor was $76,287. Predecessor depreciation expense for the period January 1, 2024 through February 13, 2024 was $37,356.

NOTE 6 – ACCRUED LIABILITIES

Accrued liabilities consisted of the following as of March 31, 2025 and December 31, 2024:

	March 31,		December 31,
	2025		2024
	(Successor)		(Successor)
Employee-related liabilities	$	61,078	$	244,302
Accrued franchise taxes		78,448		78,448
Accrued legal expenses		-		593,825
Insurance payable		275,133		-
Penalty for late S-1 filing and effectiveness		55,000		55,000
Accrued consulting and professional services		-		941,600
	$	469,659	$	1,913,175

NOTE 7 – LEASES

As of March 31, 2025 and December 31, 2024, the Company holds a five-year lease for laboratory and office space. The lease has escalating contractual rent and variable rent components and the Company elected to separate the contractual and variable elements for valuing the operating lease liability and right-to-use asset. The lease does not have any options for extension or expansion. The Company recorded the following lease costs:

	For the three months ended March 31, 2025 (Successor)		For the period from February 14, 2024 through March 31, 2024 (Successor)		For the period from January 1, 2024 through February 13, 2024 (Predecessor)
Operating leases:
Operating lease cost	$	229,331	$	76,444	$	152,887
Variable operating lease cost		187,730		58,185		116,371
Total lease cost	$	417,061	$	134,629	$	269,258

The right-of-use asset, net for the operating lease was recorded in the consolidated balance sheets as follows:

	March 31,		December 31,
	2025		2024
	(Successor)		(Successor)
Right-of-use assets, net	$	1,271,186	$	1,464,367

The operating lease liability for the operating lease was recorded in the consolidated balance sheets as follows:

	March 31,			December 31,
	2025			2024
	(Successor)			(Successor)
Operating lease liabilities, current	$	905,005		$	876,392
Operating lease liabilities, non-current		461,580			699,107
Total operating lease liabilities	$	1,366,585		$	1,575,499

Weighted-average remaining lease term of operating leases (in years)		1.50			1.75
Weighted-average discount rate for operating leases		9.60	%		9.60	%

The following table reconciles the undiscounted future minimum lease payments under the non-cancelable operating lease with terms of more than one year to the total operating lease liabilities recognized on the Company’s balance sheet as of March 31, 2025:

Maturity of the Company’s lease liabilities as of March 31, 2025 is as follows:

2025 (remainder of year)	$	744,992
2026		726,394
Total lease payments		1,471,386
Less: imputed interest		(104,801	)
Total lease liabilities	$	1,366,585

NOTE 8 – STOCKHOLDERS’ DEFICIT

Successor Series A Convertible Preferred Stock

The Company designated 12,580 shares of its authorized preferred stock as the Series A Preferred Stock and the rights, preferences and privileges of the Series A Preferred Stock are summarized below.

Each share of Series A Preferred Stock has a stated value of $1,000 per share and, when issued, the Series A Preferred Stock was fully paid and non-assessable. The Series A Preferred Stock, ranks senior to all other Company capital stock unless required holder votes are obtained to create a class of stock senior to Series A Preferred Stock. The requisite holders of Series A Preferred Stock consented to the issuance of the Series C Preferred Stock described below, which ranks senior to the Series A Preferred Stock and Series B Preferred Stock.

Dividend and Participation Rights: The holders of Series A Preferred Stock will be entitled to dividends, on an as-if converted basis, equal to and in the same form as dividends actually paid on shares of Common Stock, when and if actually paid. Series A Preferred Stockholders will be entitled to participate pro rata in any purchase rights extended to holders of Common Stock on an as-converted basis.

Conversion: Each holder of Series A Preferred Stock may convert at any time, all, or any part, of the outstanding Series A Preferred Stock into shares of the Common Stock at the initial “Conversion Price” of $1,000, which is subject to customary adjustments for stock splits. The Company’s Board of Directors has the right, at any time, with the written consent of the Required Holders (as defined in the Certificate of Designation of Preferences, Rights and Limitations of the Series A Convertible Preferred Stock (the “Series A Certificate of Designations”)), to lower the fixed conversion price to any amount and for any period of time. If 90 days or 180 days following the occurrence of the effective date of the registration statement filed pursuant to the First PIPE Registration Rights Agreement, the Conversion Price then in effect is greater than the greater of $100.00 and the Market Price (as defined in the Series A Certificate of Designations) then in effect (the “Adjustment Price”), the Conversion Price shall automatically lower to the Adjustment Price. In connection with such adjustment provisions, the Conversion Price was reset to $100.00.

Alternate Conversion: Following the occurrence and during the continuance of a Trigger Event (as defined below), each holder may alternatively elect to convert the Series A Preferred Stock at the “Alternate Conversion Price” equal to the lesser of the Conversion Price and the greater of $100.00 (the “Series A Conversion Price Floor”) or 80% of the 5-day volume weighted average price of a share of Common Stock. Trigger Events include customary terms related to exchange listing, registration rights, failure to deliver shares on conversion or exercise of derivative instruments, or insolvency. Notwithstanding the Series A Conversion Price Floor, if the Series A Conversion Price Floor is greater than 80% of the 5-day volume weighted average price of a share of Common Stock, then the Conversion Amount (as defined in the Certificates of Designations) is increased by a multiplier resulting in the convertibility of the shares of Series A Preferred Stock into the number of shares of Common Stock that would have been issuable if the Alternate Conversion Price had been equal to such lower volume weighted average price. Such multiplier was in effect from when the registration statement for the resale of shares of Common Stock issuable upon conversion of the Series A Preferred Stock was declared effective on July 5, 2024 because such effectiveness was after the applicable deadline therefore and, as a result of such multiplier, such registration statement registered fewer than the maximum number of shares of Common Stock issuable upon such conversion. Such multiplier ceased to apply on January 6, 2025, the 20^th trading day after the effectiveness of the additional registration statement registering the resale of additional shares of Common Stock issuable upon conversion of the Series A Preferred Stock resulting from such shortfall, which additional registration statement was declared effective on December 5, 2024.

Redemptions: Upon bankruptcy or liquidation, Series A Preferred Stock will be redeemed at a 25% premium (or at 50% premium 180 days after issuance) to the greater of the conversion amount or the number of shares multiplied by the highest closing price within the preceding 20 days. Additionally, the Company may voluntarily redeem the Series A Preferred Stock at a 20% premium to the greater of the conversion amount or the number of shares multiplied by the highest closing price within the preceding 20 days.

The holders of the Series A Preferred Stock have no voting rights.

In February 2024, the Company consummated a private placement (the “Series A PIPE Financing”) of 10,089 shares of Series A Preferred Stock, warrants to purchase 6,127 shares of Common Stock (the “February 2024 PIPE Common Warrants”) and warrants to purchase 2,500 shares of Series A Preferred Stock (the “Preferred Warrants”) (See Note 9 below), pursuant to the Amended and Restated Securities Purchase Agreement, dated February 14, 2024, by and among the Company, PBAX and certain accredited investors (the “Initial Investors”) for aggregate cash proceeds to the Company of approximately $10.0 million, including cash previously received for convertible bridge note proceeds.

A portion of such Series A Preferred Stock was issued as consideration for the cancellation of outstanding indebtedness, including a promissory note of PBAX amounting to $1,555,000 and the Predecessor’s convertible bridge notes amounting to $627,154.

The Company accounts for preferred stock as either equity or debt-like securities based on an assessment of the Preferred Stock rights and preferences and applicable authoritative guidance in ASC 480 and ASC 815, Derivatives and Hedging. The Company has concluded that the Series A, Series B Preferred Stock and Series C Preferred Stock, which have no cash redemption features outside of the Company’s control are treated as equity. The Company has also concluded that the Series A Common Warrants and Series C Common Warrants do not possess redemption features outside of the Company’s control and are treated as equity.

Due to delayed filing and declaration of effectiveness relative to the deadlines defined in the Registration Rights Agreement, on June 30, 2024, the Company accrued a registration rights penalty amounting to $645.693, which was payable in cash to the holders of Series A Preferred Stock. On March 27, 2025, the Company entered into a Waiver of Registration Rights Penalties whereby the Investor agreed to waive registration rights penalty amounting to $568,400 in exchange for the Company’s forgiveness of a $600,000 shortfall in the exercise price of the Series A Preferred Warrants that was unpaid. In December 2024, the Investor exercised its Series A Preferred Warrants to purchase shares of Series A Preferred stock of the Company for which such investor remitted a partial exercise price amount of $100,000 instead of the exercise price of $700,000.

During the three months ended March 31, 2025, 1,090 shares of Series A Preferred Stock were converted into 288,941 shares of Common Stock. The conversion ratio was based on the Series A Certificate of Designations and reflected the application of the Alternate Conversion Price described above, applicable as of each date of conversion plus a 25% premium for penalties due. As a result of the 25% premium, the Company recorded the following: 1) for 473 shares of Series A Preferred Stock converted during the continuance of a Trigger Event as described above, the Company recorded a deemed dividend of $118,250, which represents the fair value of excess common shares transferred to the preferred shareholders based on an average per share common share price of $4.75, the effect of which was an increase in the net loss attributable to common shareholders in the accompanying consolidated statement of operations for the three months ended March 31, 2025, and 2) for 625 shares of Series A Preferred Stock converted after the expiration of a Trigger Event as described above, the Company recorded an inducement expense of $156,250, which represents the fair value of excess common shares transferred to the preferred shareholders based on an average per share common share price of $4.75 and is reflected as part of other income (expense), net, on the accompanying condensed consolidated statement of operations for the three months ended March 31, 2025. During the three months ended March 31, 2024, no shares of Series A Preferred Stock were converted into shares of Common Stock

Additionally, certain investors are owed an aggregate of 13,835 shares of Common Stock of the Company due to shortfall in number of shares issued upon conversion, which represents the 25% premium not received during the year ended December 31, 2024. Accordingly, during the year ended December 31, 2024, the Company reduced additional paid-in capital by $85,500 and recorded a liability of $85,500, which is reflected on the accompanying consolidated balance sheets as deemed dividend - common stock liability as of March 31, 2025 and December 31, 2024. As of March 31, 2025, there were 1,429 remaining shares of Series A Preferred Stock, which were convertible into approximately 729,082 shares of Common Stock.

Successor Series B Convertible Preferred Stock

The Company designated 626 shares of its authorized preferred stock as Series B Preferred Stock and established the rights, preferences and privileges of the Series B Preferred Stock pursuant to the Certificate of Designation of Preferences, Rights and Limitations of the Series B Convertible Preferred Stock (the “Series B Certificate of Designations” and, together with the Series A Certificate of Designations, the “Certificates of Designations”), as summarized below. Except as set forth below, the Series B Preferred Stock has terms and provisions that are identical to those of the Series A Preferred Stock.

On April 1, 2024, we consummated a private placement of 626 shares of the Company’s Series B Preferred Stock, pursuant to the Securities Purchase Agreement, dated March 28, 2024, by and among us and certain accredited investors, for aggregate cash proceeds to us of approximately $0.5 million. Such private placement closed on April 1, 2024.

The holders of the Series B Preferred Stock have no voting rights.

The Series B Preferred Stock ranks pari passu with the Series A Preferred Stock.

Due to delayed filing and declaration of effectiveness relative to the deadlines defined in the Registration Rights Agreement, through December 31, 2024, the Company accrued a registration rights penalty amounting to $55,000, which is payable in cash to the holders of Series B Preferred Stock and included in accrued liabilities on the accompanying condensed consolidated balance sheets as of March 31, 2025 and December 31, 2024, respectively.

During the three months ended March 31, 2025, 75 shares of Series B Preferred Stock were converted into 50,001 shares of Common Stock. The conversion ratio was based on the Series B Certificate of Designations and included the 25% premium to the greater of the conversion amount or the number of shares multiplied by the highest closing price within the preceding 20 days. As a result of the 25% premium, the Company recorded a deemed dividend of $18,750 which represents the fair value of excess common shares transferred to the preferred shareholders based on an average per share common share price of $1.875, the effect of which was an increase in the net loss attributable to common shareholders in the accompanying consolidated statement of operations for the three months ended March 31, 2025. As of March 31, 2025, there were 198 remaining shares of Series B Preferred Stock, which were convertible into approximately 544,770 shares of Common Stock.

Successor Series C Convertible Preferred Stock

The Company designated 2,853 shares of its authorized preferred stock as the Series C Preferred Stock and the rights, preferences and privileges of the Series C Preferred Stock are summarized below.

Each share of Series C Preferred Stock has a stated value of $1,000 per share and, when issued, the Series C Preferred Stock was fully paid and non-assessable. The Series C Preferred Stock, ranks senior to all other Company capital stock unless required holder votes are obtained to create a class of stock senior to Series C Preferred Stock.

Ranking: The Series C Preferred Stock are senior in rank with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company to the Series A Convertible Preferred Stock, the Series B Convertible Preferred Stock, and Common Stock. The Company shall not, without the consent of the Required Holders, authorize or issue any shares of senior rank with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company, shares of pari passu rank with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company, or shares of junior ranking stock that have a maturity or redemption date prior to the first anniversary of the Series C Preferred Stock issuance date.

Dividend and Participation Rights: The holders of Series C Preferred Stock will be entitled to dividends, on an as-if converted basis, equal to and in the same form as dividends actually paid on shares of Common Stock, when and if actually paid. Series C Preferred Stockholders will be entitled to participate pro rata in any purchase rights extended to holders of Common Stock on an as-converted basis.

Conversion: Each holder of Series C Preferred Stock may convert at any time, all, or any part, of the outstanding Series C Preferred Stock into shares of the Common Stock at the initial “Conversion Price” of $22.40, which is subject to customary adjustments for stock splits.

Alternate Conversion: Following the occurrence and during the continuance of a Trigger Event (as defined below), each holder may alternatively elect to convert the Series C Preferred Stock at the “Alternate Conversion Price” equal to the lesser of the then current Conversion Price and the greater of $1.96 (the “Series C Conversion Price Floor”) or 80% of the trailing 5-day daily volume weighted average price of a share of Common Stock. Trigger Events include customary terms related to exchange listing, registration rights, failure to deliver shares on conversion or exercise of derivative instruments, or insolvency. Notwithstanding the Series C Conversion Price Floor, if the Series C Conversion Price Floor is greater than 80% of the 5-day volume weighted average price of a share of Common Stock, then the Conversion Amount (as defined in the Series C Certificate of Designation) for such Series C Preferred Stock is increased by a multiplier resulting in the convertibility of the shares of Series C Preferred Stock into the number of shares of Common Stock that would have been issuable if the Alternate Conversion Price had been equal to such lower volume weighted average price.

Redemptions: Upon bankruptcy or liquidation, Series C Preferred Stock will be redeemed at a 25% premium to the conversion amount multiplied by the highest Alternative Conversion Price within the preceding 20 days multiplied by 125% of the greatest closing sale price of the Common Stock on any day immediately following public announcement of insolvency and the date the entire redemption payment has been made. Additionally, the Company may voluntarily redeem the Series C Preferred Stock at a 25% premium to the greater of the Conversion Amount or the number of shares multiplied by the highest closing price within the preceding 20 days.

The holders of the Series C Preferred Stock have no voting rights.

In September 2024, the Company consummated a private placement (the “Series C PIPE Financing”) of 2,853 shares of Series C Preferred Stock and warrants to purchase 81,753 shares of Common Stock (the “September 2024 PIPE Common Warrants”) (See Note 9 below), pursuant to the Securities Purchase Agreement, dated September 25, 2024, by and among the Company and certain accredited investors for aggregate gross cash proceeds to the Company of approximately $1.25 million.

The Company accounts for preferred stock as either equity or debt-like securities based on an assessment of the Preferred Stock rights and preferences and applicable authoritative guidance in ASC 480 and ASC 815, Derivatives and Hedging. The Company has concluded that the Series C Preferred Stock, which has no cash redemption features outside of the Company’s control are treated as equity. The Company has also concluded that the Series C Common Warrants do not possess redemption features outside of the Company’s control and are treated as equity.

On March 10, 2025, the Company paid certain investors $395,000 for the redemption of 316 shares of the Series C Preferred Stock, which included $267,856 of the initial purchase price and a cash redemption premium of $127,144. During the three months ended March 31, 2025, the $127,144 excess paid over the initial purchase price was included in deemed dividend on the accompanying condensed consolidated statement of operations.

As of March 31, 2025, there were 2,537 remaining shares of Series C Preferred Stock, which were convertible into approximately 1,294,388 shares of Common Stock.

Predecessor Preferred Stock Conversion to Common Stock

At December 31, 2023, Predecessor had 75,120,105 shares of capital stock authorized, consisting of 45,350,000 shares of Predecessor common stock and 29,770,105 shares of Predecessor convertible preferred stock. All classes of the Predecessor’s stock had a par value of $0.0001. On February 14, 2024, on the close of the Merger, the Predecessor’s outstanding convertible preferred stock converted to Common Stock at a conversion ratio of 0.0806 and 0.01757 shares of Common Stock for each share of Predecessor Series Seed Convertible Preferred Stock and Predecessor Series A Convertible Preferred Stock, respectively. This resulted in the issuance of 4,155 and 40,000 shares of Common Stock for the Predecessor’s Series Seed Preferred Stock and Predecessor Series A Preferred Stock, respectively.

Purchase of Common Stock by Keystone Capital Partners under the Equity Line of Credit (“ELOC”)

On February 14, 2024, in conjunction with, and as a condition to the closing of the Series A PIPE Financing, the Company entered into a common stock purchase agreement (the “Old Keystone Purchase Agreement”) with Keystone Capital Partners, L.P. (“Keystone”), pursuant to which we may sell and issue, and Keystone is obligated to purchase, up to 250,000 shares subject to the Company obtaining all necessary stockholder approvals to issue the shares to Keystone. The price of the shares purchased by Keystone under the ELOC is 90% of various volume-weighted average price (“VWAP”) and closing price-based formulae, and requires a waiver, should the selling price be below $100.00 per share. As consideration for Keystone’s commitment to purchase shares of Common Stock pursuant to the Old Keystone Purchase Agreement, we issued an aggregate of 18,643 shares of Common Stock to Keystone.

On November 8, 2024, the Company consummated a purchase agreement with Keystone (the “New Keystone Purchase Agreement”) pursuant to which we may sell and issue, and Keystone is obligated to purchase, up to $20.6 million of shares of Common Stock, constituting the remaining unsold balance under the original Keystone Purchase Agreement, subject to certain market conditions. The price of the shares purchased by Keystone under the ELOC is 90% of various volume-weighted average price (“VWAP”) and closing price-based formulae, and requires a waiver, should the selling price be below $1.00 per share.

For the three months ended March 31, 2025, the Company sold 290,618 common shares of the Company for net proceeds of $1,227,241 under the New Keystone ELOC. Additionally, in January 2025, the Company received net proceeds of $716,694 from the collection of stock subscription receivable, which was reflected as a stock subscription receivable on December 31, 2024. The Company sought and received a waiver to sell the shares below the applicable minimum price in the agreement.

Issuance of Common Stock to Arena Business Solutions Global SPC II, Ltd. (“Arena”) for the Arena ELOC

On February 23, 2024, the Company entered into a common stock purchase agreement (the “Arena Purchase Agreement”) with Arena, pursuant to which we may sell and issue, and Arena is obligated to purchase, up to $25,000,000 of Common Stock. The price of the shares purchased by Arena under the ELOC is 90% of various VWAP and closing price-based formulae, and requires a waiver, should the selling price be below $25.00 per share. As consideration for Arena commitment to purchase shares of Common Stock pursuant to the Arena Purchase Agreement, in May 2024, the Company issued 3,456 shares of Common Stock to Arena valued at $500,000, which is reflected as deferred offering costs on the accompanying consolidated balance sheet as of March 31, 2025 and December 31, 2024. The Company has sold no shares of Common Stock to Arena under the Arena ELOC during the three months ended March 31, 2025 and 2024.

Sale of Pre-funded Warrants and Common Stock

On February 5, 2025, the Company announced the pricing of a reasonable best efforts public offering (the “Offering”), with participation from a member of the Company’s board of directors and a single institutional investor, for the purchase and sale of (i) 2,551,020 shares of its common stock, par value $0.0001 per share (the “Common Stock”) or common stock equivalents in lieu thereof (the Company sold 300,000 shares of its common stock and 2,251,020 pre-funded warrants) ; and (ii) common warrants to purchase up to 2,551,020 shares of common stock (the “Warrants”), at a combined public offering price of $1.96 per share and Warrant. In connection with the Offering, on February 5, 2025, the Company entered into a securities purchase agreement (the “SPA”) with the investors. The SPA contains customary representations, warranties and agreements of the Company and each investor and customary indemnification rights and obligations of the parties. In connection with this offering, the Company received net proceeds of approximately $4.2 million, which is net of offering costs and fees of $839,004. During the three months ended March 31, 2025, 300,000 shares of common stock were purchased upon the closing of the Offering and 1,824,280 shares were issued in connection with the exercise of pre-funded warrants, totaling 2,124,280 shares of its common stock issued of the aggregate amount of 2,551,020 Common Stock shares sold. As of March 31, 2025, 426,740 pre-funded warrants remain exercisable.

The Warrants have an exercise price of $1.96 per share, are immediately exercisable upon stockholder approval and have a term of exercise equal to five years following the initial exercise date. The exercise price and number of shares of Common Stock issuable upon exercise is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting the Common Stock and the exercise price.

In connection with the Offering, on February 5, 2025, the Company entered into a placement agency agreement (the “Placement Agency Agreement”) with Alliance Global Partners (“A.G.P.”), as the exclusive placement agent in connection with the Offering (the “Placement Agent”). Pursuant to a side letter between the Placement Agent and JonesTrading Institutional Services LLC (“Jones”), dated February 3, 2025, Jones agreed to be a financial advisor for the Offering. In connection with the services provided by Jones, the Placement Agent and Jones agreed that the Placement Agent will receive an aggregate fee equal to 6% of the gross proceeds received in the Offering and Jones will receive an aggregate fee equal to 3% of the gross proceeds received in the Offering. In addition, the Company agreed to reimburse the Placement Agent for its legal fees and expenses and other out-of-pocket expenses in an amount up to $85,000, non-accountable expenses of up to $25,000 and has agreed to reimburse Jones for all reasonable and documented out-of-pocket fees and expenses, including but not limited to travel and other out-of-pocket expenses in an amount not to exceed $15,000.

The Company’s directors and executive officers agreed not to offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any shares of common stock or other securities convertible into or exercisable or exchangeable for common stock for a period of 90 days following the closing date of the Offering, which terms may be waived in the sole discretion of and without notice by the Placement Agent, subject to certain exceptions. In addition, the Company has agreed to not enter into variable rate financings for a period of 180 days following the closing date, subject to certain exceptions, or enter into any equity financings for a period of 60 days following the closing date, subject to certain exceptions.

In connection with the Offering, the Conversion Price of the Series A Preferred Stock and Series C Preferred Stock reset to $1.96 per share of Common Stock. No shares of Series A Preferred Stock or Series C Preferred Stock were converted after the Offering, during the three months ended March 31, 2025.

NOTE 9 – WARRANTS

Accounting for warrants

The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments’ specific terms and applicable authoritative guidance in ASC 480 and ASC 815, Derivatives and Hedging. The assessment considers whether the instruments are free standing financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company’s own common stock and whether the instrument holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, was conducted at the time of warrant issuance and as of each subsequent period end date while the instruments are outstanding.

Public and Private Placement Warrants (Successor)

At March 31, 2025 and December 31, 2024, there were 91,925 Public and Private Placement Warrants outstanding, each with a right to purchase one share of Common Stock for $1,150. The Public and Private Placement Warrants became exercisable 30 days after the Merger. No warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the Common Stock issuable upon exercise of the warrants and a current prospectus relating to such Common Stock. The Public and Private Placement Warrants were registered under a resale registration statement on Form S-1 (File No. 333-279156), which was declared effective by the Securities and Exchange Commission on July 5, 2024.

Notwithstanding the foregoing, Public and Private Placement Warrant holders may, during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. The Public and Private Placement Warrants will expire five years after the Merger or earlier upon redemption or liquidation.

Once the warrants became exercisable, the Company may, with 30 days prior notice, redeem the Public Warrants in whole and not in part, at a price of $0.01 per warrant if the shares underlying the warrants are registered and if the closing price of Common Stock equals or exceeds $1,800.00 for 20 of the prior 30 trading days. If the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do so on a “cashless basis,” as described in the warrant agreement.

The exercise price and number of shares of Common Stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary dividend or recapitalization, reorganization, merger, or consolidation. However, the warrants will not be adjusted for issuances of Common Stock at a price below their respective exercise prices. Additionally, in no event will the Company be required to net cash settle the warrants.

As discussed above, the Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments’ specific terms and applicable authoritative guidance in ASC 480 and ASC 815, Derivatives and Hedging. Management has concluded that the Public Warrants issued pursuant to the warrant agreement qualify for equity accounting treatment.

Series A Common Warrants (Successor) - February 2024

The Company’s 6,127 Series A Common Warrants are initially exercisable for cash at an exercise price equal to the greater of (x) $920 (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations and similar events) and (y) the closing price of the Common Stock on the trading day immediately prior to the Subscription Date (as defined in the Series A Common Warrant Agreement). The exercise price is subject to adjustment for stock splits, combinations and similar events, and, in the event of stock dividends and splits, the number of shares of Common Stock issuable upon the exercise of the February 2024 PIPE Common Warrants will also be adjusted so that the aggregate exercise price shall be the same immediately before and immediately after any such adjustment. On stockholder approval for the issuance of shares underlying the warrants, granted April 30, 2024, the exercise price of the Series A Common Warrants was adjusted to $139 per share, per the terms of the Securities Purchase Agreement.

The Series A Common Warrants will be exercisable beginning six months after the issuance date (the “Initial Exercisability Date”) and expiring on the third anniversary of the Initial Exercisability Date. The Series A Common Warrants require “buy-in” payments to be made by us for failure to deliver any shares of Common Stock issuable upon exercise.

If at the time of exercise of the Series A Common Warrants, there is no effective registration statement registering the shares of the Common Stock underlying the Series A Common Warrants, such warrants may be exercised on a cashless basis pursuant to their terms.

If we issue options, convertible securities, warrants, shares, or similar securities to holders of Common Stock, each holder of February 2024 PIPE Common Warrants has the right to acquire the same as if the holder had exercised its Series A Common Warrants. The holders of Series A Common Warrants are entitled to receive any dividends paid or distributions made to our holders of Common Stock on an “as if converted” basis.

The Series A Common Warrants prohibit us from entering into specified fundamental transactions unless the Successor entity assumes all of our obligations under the Series A Common Warrants under a written agreement before the transaction is completed. Upon specified corporate events, a holder of Series A Common Warrants will thereafter have the right to receive upon exercise such shares, securities, cash, assets or any other property whatsoever which the holder would have been entitled to receive upon the happening of the applicable corporate event had the Series A Common Warrants been exercised immediately prior to the applicable corporate event. When there is a transaction involving specified changes of control, a holder of Series A Common Warrants can request the Company to exchange the then unexercised portion of their Series A Common Warrants for consideration equal to the Black-Scholes value thereof, which shall be settled, at the option of the Company in either (i) the form of rights convertible into the consideration receivable by holders of the underlying shares of common stock, based upon the value of the shares of the successor entity over a specified period or (ii) cash in an amount equal to the Black-Scholes value.

The Company’s Series A Common Warrants are exercisable into Common Stock and are recorded as equity.

September 2024 Series C Common Warrants (Successor)

The Company’s 81,753 September 2024 Series C Common Warrants are initially exercisable for cash at an initial exercise price equal to $9.80 (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations and similar events). The exercise price is also subject to adjustment for the sale of Common Stock, or issuance or modification of options to result in the purchase of one share of Common Stock at an effective price per share lower than the then current Series C Common Warrant exercise price. Additionally, should the Company issue any variable priced convertible securities, the holders may elect an alternative exercise price that allows exercise at the effective purchase price applicable to the convertible security.

The September 2024 Series C Common Warrants are exercisable beginning six months after the issuance date (the “Initial Exercisability Date”) and expire on the third anniversary of the Initial Exercisability Date. The Series C Common Warrants require “buy-in” payments to be made by us for failure to deliver any shares of Common Stock issuable upon exercise.

If at the time of exercise of the Series C Common Warrants, there is no effective registration statement registering the shares of the Common Stock underlying the Series C Common Warrants, such warrants may be exercised on a cashless basis pursuant to their terms.

If we issue options, convertible securities, warrants, shares, or similar securities to holders of Common Stock, each holder of Series C Common Warrants has the right to acquire the same as if the holder had exercised its Series C Common Warrants. The holders of Series C Common Warrants are entitled to receive any dividends paid or distributions made to our holders of Common Stock on an “as if converted” basis.

The Series C Common Warrants prohibit us from entering into specified fundamental transactions unless the successor entity assumes all of our obligations under the Series C Common Warrants under a written agreement before the transaction is completed. Upon specified corporate events, a holder of Series C Common Warrants will thereafter have the right to receive upon an exercise such shares, securities, cash, assets or any other property whatsoever which the holder would have been entitled to receive upon the happening of the applicable corporate event had the Series C Common Warrants been exercised immediately prior to the applicable corporate event. When there is a transaction involving specified changes of control, a holder of Series C Common Warrants can request the Company to exchange the then unexercised portion of their Series C Common Warrants for consideration equal to the Black-Scholes value thereof, which shall be settled, at the option of the Company, in either (i) the form of rights convertible into the consideration receivable by holders of the underlying shares of common stock, based upon the value of the shares of the successor entity over a specified period or (ii) cash in an amount equal to the Black-Scholes value.

On February 5, 2025, in connection with the sale of pre-funded warrants and common stock (See Note 8), the exercise price of the Series C Common Warrants was lowered to $0.04 per warrant share. Upon the trigger of the down-round provision of the Series C Common Warrants, on February 5, 2025, the Company recorded a deemed dividend of $83,083 which represents the fair value transferred to the warrant holders from the down-round feature being triggered. The Company calculated the difference between the Series C Common Warrant’s fair value on February 5, 2025, the date the down-round feature was triggered, using the current exercise price at the time of $9.80 and the new exercise price of $0.04. The deemed dividend increased net loss attributable to common shareholders by $83,083 in the condensed consolidated statement of operations for the three months ended March 31, 2025. The fair value of the Series C Common Warrants immediately prior to and immediately after the exercise price adjustment, were estimated using the Black-Scholes option-pricing model with the following assumptions:

		February 5, 2025
Exercise price		$0.04 to $9.80
Term (years)		3.0
Expected stock price volatility		109.17%
Risk-free rate of interest		4.19%

The Company’s Series C Common Warrants are exercisable into Common Stock and are recorded as equity.

December 2024 and January 2025 Common Warrants (Successor)

On December 23, 2024, the Company issued warrants to purchase an aggregate of 84,061 shares of Common Stock to certain investors affiliated with each other to induce investors to exercise their Series A Preferred Warrants for cash (the “December 2024 Common Warrants”). The December 2024 Common Warrants are exercisable for cash at an initial exercise price equal to $5.61 (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations and similar events). The December 2024 Common Warrants are exercisable beginning six months after the issuance date (the “Initial Exercisability Date”) and expire on the third anniversary of the Initial Exercisability Date. The December 2024 Common Warrants require “buy-in” payments to be made by us for failure to deliver any shares of Common Stock issuable upon exercise. If at the time of exercise of the December 2024 Common Warrants, there is no effective registration statement registering the shares of the Common Stock underlying the December 2024 Common Warrants, such warrants may be exercised on a cashless basis pursuant to their terms.

On January 6, 2025, the Company issued warrants to purchase an aggregate of 163,853 shares of Common Stock to certain investors affiliated with each other to induce investors to exercise their Series A Preferred Warrants for cash (the “January 2025 Common Warrants”). The January 2025 Common Warrants are exercisable for cash at an initial exercise price equal to $5.82 (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations and similar events). The January 2025 Common Warrants are exercisable beginning six months after the issuance date (the “Initial Exercisability Date”) and expire on the third anniversary of the Initial Exercisability Date. The January 2025 Common Warrants require “buy-in” payments to be made by us for failure to deliver any shares of Common Stock issuable upon exercise. If at the time of exercise of the January 2025 Common Warrants, there is no effective registration statement registering the shares of the Common Stock underlying the January 2025 Common Warrants, such warrants may be exercised on a cashless basis pursuant to their terms.

If we issue options, convertible securities, warrants, shares, or similar securities to holders of Common Stock, each holder of December 2024 Common Warrants and January 2025 Common Warrants have the right to acquire the same as if the holder had exercised its December 2024 Common Warrants or January 2025 Common Warrants. The holders of December 2024 Common Warrants and January 2025 Common Warrants are entitled to receive any dividends paid or distributions made to our holders of Common Stock on an “as if converted” basis.

The December 2024 Common Warrants and January 2025 Common Warrants prohibit us from entering into specified fundamental transactions unless the successor entity assumes all of our obligations under the December 2024 Common Warrants and January 2025 Common Warrants agreements before the transaction is completed. Upon specified corporate events, a holder of December 2024 Common Warrants and January 2025 Common Warrants will thereafter have the right to receive upon an exercise such shares, securities, cash, assets or any other property whatsoever which the holder would have been entitled to receive upon the happening of the applicable corporate event had the December 2024 Common Warrants and January 2025 Common Warrants been exercised immediately prior to the applicable corporate event. Upon the consummation of any Fundamental Transaction, the Company shall exchange the December 2024 Common Warrants and January 2025 Common Warrants for consideration equal to the Black Scholes Value of such portion of the December 2024 Common Warrants and January 2025 Common Warrants subject to exchange (collectively, the “Aggregate Black Scholes Value”) in the form of, at the Company’s election (such election to pay in cash or by delivery of the Rights (as defined below), a “Consideration Election”), either (I) rights (with a beneficial ownership limitation, mutatis mutandis) (the “Rights”), convertible in whole, or in part, at any time, without the requirement to pay any additional consideration, at the option of the Holder, into such Corporate Event Consideration applicable to such Fundamental Transaction equal in value to the Aggregate Black Scholes Value issuable upon conversion of the Rights to be determined in increments of 10% (or such greater percentage as the Holder may notify the Company from time to time) of the portion of the Aggregate Black Scholes Value attributable to such Shares (the “Share Value Increment”), with the aggregate number of Shares issuable upon exercise of the Rights with respect to the first Successor Share Value Increment determined based on 70% of the Closing Bid Price of the Shares on the date the Rights are issued and on each of the nine subsequent Trading Days, in each case, the aggregate number of additional Shares issuable upon exercise of the Rights shall be determined based upon a Share Value Increment at 70% of the Closing Bid Price of the Shares in effect for such corresponding Trading Day (such ten (10) Trading Day period commencing on, and including, the date the Rights are issued, the “Rights Measuring Period”), or (II) in cash; provided, that the Company shall not consummate a Fundamental Transaction if the Corporate Event Consideration includes capital stock or other equity interest (the “Successor Shares”) either in an entity that is not listed on an Eligible Market or an entity in which the daily share volume for the applicable Successor Shares for each of the twenty Trading Days prior to the date of consummation of such Fundamental Transaction is less than the aggregate number of Successor Shares issuable to the Holder upon conversion in full of the applicable Rights (without regard to any limitations on conversion therein, assuming the exercise in full of the Rights on the date of issuance of the Rights and assuming the Closing Bid Price of the Successor Shares for each Trading Day in the Rights Measuring Period is the Closing Bid Price on the Trading Day ended immediately prior to the time of consummation of the Fundamental Transaction).

The Company’s December 2024 Common Warrants and January 2025 Common Warrants are exercisable into Common Stock, which has no cash redemption features that require liability treatment. The Company has recorded the December 2024 Common Warrants and January 2025 Common Warrants as equity.

On December 23, 2024, in connection with the issuance of the December 2024 Warrants, the Company calculated the fair value of such warrants using the Black-Scholes option-pricing model, and the Company determined that the aggregate total fair value of the December 2024 Warrants amounted to approximately $0.3 million, which were considered offering costs and were netted against the net proceeds received from the exercise of Series A Preferred Warrants under the guidance of ASU 2021-04. These offering costs are offset in additional paid-in capital with no impact on equity.

On January 6, 2025, in connection with the issuance of the January 2025 Common Warrants, the Company calculated the fair value of such warrants using the Black-Scholes option-pricing model, and the Company determined that the aggregate total fair value of the January 2025 Common Warrants amounted to approximately $0.7 million, which were considered offering costs and were netted against the net proceeds received from the exercise of Series A Preferred Warrants under the guidance of ASU 2021-04. These offering costs are offset in additional paid-in capital with no impact on equity.

Preferred Warrants

The 2,500 Preferred Warrants were initially exercisable for cash at an exercise price equal to $800. The exercise price was subject to adjustment for stock splits, combinations and similar events, and, in the event of stock dividends and splits, the number of shares of Series A Preferred Stock issuable upon the exercise of the Preferred Warrant will also be adjusted so that the aggregate exercise price shall be the same immediately before and immediately after any such adjustment.

We had the right, conditional upon the share price of CERO stock to be trading above $100.00 per share, to require the holders of Preferred Warrants to exercise such Preferred Warrants into up to an aggregate number of shares of Preferred Stock equal to the holder’s pro rata amount of 2,500 shares of Preferred Stock. In connection with the Series C PIPE Financing, we agreed with certain holders of the Preferred Warrants not to exercise such right to require such exercise by the holders thereof in consideration for their investment in the Series C PIPE Financing.

The Preferred Warrants prohibited us from entering into specified fundamental transactions unless the Successor assumes all of our obligations under the Preferred Warrants under a written agreement before the transaction is completed. Upon specified corporate events, a holder of the Preferred Warrants thereafter had the right to receive upon an exercise such shares, securities, cash, assets or any other property whatsoever which the holder would have been entitled to receive upon the happening of the applicable corporate event had the Preferred Warrant been exercised immediately prior to the applicable corporate event.

During the three months ended March 31, 2025, 625 Series A Preferred Warrants were exercised into 625 shares of Series A Preferred Stock for gross proceeds of $500,000. During the three months ended March 31, 2024, no Series A Preferred Warrants were exercised into shares of Series A Preferred Stock.

The Company’s Preferred Warrants were exercisable into Series A Preferred Stock, which had no cash redemption features that required liability treatment. The Company recorded the Preferred Warrants as equity.

February 2025 Pre-funded Warrants and February 2025 Common Warrants

On February 5, 2025, in connection with the February 2025 Offering (See Note 8), the Company sold (i) 300,000 shares of Common Stock, (ii) Pre-Funded Warrants to purchase up to 2,251,020 shares of Common Stock, and (iii) Common Warrants to purchase up to 2,551,020 shares of common stock, at a combined public offering price of $1.96 per share and Warrant. During the three months ended March 31, 2025, 1,824,280 shares of its common stock were issued following the exercise of certain Pre-Funded Warrants. As of March 31, 2025, The remaining 426,740 Pre-Funded Warrants remain exercisable.

Additionally, in connection with the February 2025 Offering, the Company issued the February 2025 Common Warrants to purchase up to 2,551,020 shares of common stock with an exercise price of $1.96 per share, which are immediately exercisable upon stockholder approval and have a term of exercise equal to five years following date of the initial exercise date. The exercise price and number of shares of Common Stock issuable upon exercise is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting the Common Stock and the exercise price.

A summary of outstanding warrants as of March 31, 2025 is as follows:

	Number of Warrants		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)
Public and Private Placement Warrants		91,925	$	1,150.00		3.88
February 2024 Series A Common Warrants		6,127		139.00		2.37
September 2024 Series C Common Warrants		81,753		0.04		2.96
December 2024 Common Warrants		84,061		5.61		3.23
January 2025 Common Warrants		163,853		5.82		3.27
February 2025 Pre-funded Warrants		426,740		0.0001		-
February 2025 Common Warrants		2,551,020		1.96		4.86
Outstanding as of March 31, 2025		3,405,479	$	33.18		4.06

NOTE 10 – FAIR VALUE MEASUREMENTS

The Company initially recorded the earnout liability at estimated fair value using a Monte Carlo analysis and has revalued the Earnout liability at each subsequent period. The Monte Carlo analysis used the following assumptions:

				February 14
	March 31, 2025			2024 to March 31, 2024
	(Successor)			(Successor)
Starting share price	$	0.73			$307.00 to $490.00
Tranche 1 trigger price	$	125.00			$3.20 to $3.91
Tranche 2 trigger price	$	150.00			$3.85 to $4.70
Contractual term (in years)		2.9			3.9 to 4.0
Volatility		100	%		90%
Risk-free interest rate		3.82	%		4.20% to 4.21%

The classification of the fair value of the earnout liability and derivative liabilities and the change in the fair value measurement using significant inputs (Level 3) for the three months ended March 31, 2025 and for the period from January 1, 2024 through February 14, 2024 for the Predecessor and February 14, 2024 through December 31, 2024 for the Company is presented below:

	Level 1		Level 2		Level 3			Total
Preferred stock warrant liability (Predecessor):
Balance at December 31, 2023	$	-	$	-	$	320,117			320,117
Reclassification of warrant liability to equity		-		-		(320,117	)		(320,117	)
Balance at February 13, 2024	$	-	$	-	$	-		$	-

Earnout liability (Successor):
Balance at February 14, 2024		-		-		4,900,000			4,900,000
Gain on revaluation of earnout liability		-		-		(1,800,000	)		(1,800,000	)
Balance at March 31, 2024	$	-	$	-	$	3,100,000		$	3,100,000
Earnout liability (Successor):
Balance at December 31, 2024		-		-		20,000			20,000
Gain on revaluation of earnout liability		-		-		-			-
Balance at March 31, 2025	$	-	$	-	$	20,000		$	20,000

NOTE 11 – STOCK-BASED COMPENSATION

On March 25, 2024, stockholders approved the 2024 Equity Incentive Plan (2024 Plan) and 2024 Employee Stock Purchase Plan (2024 ESPP), with initial reserves of 51,726 and 5,099 shares of common stock, respectively. The 2024 Plan and 2024 ESPP became effective on February 14, 2024. No awards have been granted under the 2024 ESPP as of March 31, 2025.

Stockholders approved increases in shares available under the 2024 Plan on April 30, 2024, and November 11, 2024. The 2024 Plan has an evergreen provision for annual increases. On January 1, 2025, the reserve increased by 189,701 shares. As of March 31, 2025, 471,199 option awards have been granted, leaving no shares reserved for future issuance.

The 2024 ESPP also has an evergreen provision. On January 1, 2025, the reserve increased by 10,198 shares. No awards have been granted under the 2024 ESPP as of March 31, 2025.

Stock option activity under the 2024 Plan for the three months ended March 31, 2025 was as follows:

					Weighted
			Weighted		Average
			Average		Remaining
			Exercise		Contractual
	Outstanding		Price Per		Life
	Shares		Share		(in Years)
Balance, December 31, 2024 (Successor)		64,948	$	10.00		9.64
Options granted		406,251	$	1.43		-
Balance, March 31, 2025 (Successor)		471,199	$	2.61		9.86
Options exercisable as of March 31, 2025		71,000	$	7.56		9.57

The Company estimated the fair value of the stock options during the three months ended March 31, 2025 using Black-Scholes with the following assumptions.

	March 31,
	2025
	(Successor)
Risk-free interest rate		4.01	%
Expected life (in years)		5.0
Expected dividend yield		-	%
Expected volatility		121.09	%

For the period from February 14, 2024 through March 31, 2024, the Company recorded stock-based compensation expense of $0.09 million, of which $0.03 million was related to R&D and $0.06 was related to general and administrative. For the period from January 1, 2024 through February 13, 2024, Predecessor recorded an immaterial amount of stock-based compensation expense.

For the three months ended March 31, 2025, the Company recorded stock-based compensation expense of $304,946, of which $73,302 was related to research and development and $231,644 was related to general and administrative.

As of March 31, 2025, the Company had approximately $1,210,000 of unamortized stock-based compensation expense related to unvested stock options, which is expected to be recognized over a weighted average period of 1.8 years. The weighted average grant date calculated fair value per share of the Company’s options granted during the three months ended March 31, 2025 was $1.20. The weighted average grant date calculated fair value per share of the Company’s options granted during the period February 14, 2024, through March 31, 2024, was $1.06.

NOTE 12 – 401(K) RETIREMENT SAVINGS PLAN

The Company sponsors a 401(k) defined contribution plan covering eligible employees who elect to participate. The Company is allowed to make discretionary profit sharing and 401(k) matching contributions as defined in the plan and as approved by the Board of Directors. The Company’s contributions for the period from February 14, 2024 through March 31, 2024 was $7,956 and Predecessor contributions during the period from January 1, 2024 through February 13, 2024 was $4,685. The Company did not make any contributions to the 401(k) during the three months ended March 31, 2025.

NOTE 13 – RELATED-PARTY TRANSACTIONS

In February 2024, we issued and sold an aggregate of 10,089 shares of Series A Preferred Stock, 6,127 Series A Common Warrants and 2,500 Preferred Warrants, at a price of $800 per share of Series A Preferred Stock, for aggregate cash proceeds of approximately $8.0 million, plus additional cash proceeds of up to $2.0 million if the Preferred Warrants are exercised.

The following table summarizes the shares of our Series A Preferred Stock issued to our related parties:

Purchasers	Shares of Series A Preferred Stock		Total Purchase Price
Daniel Corey⁽¹⁾		150	$	150,000
Atwood-Edminster Trust dtd 4-2-2000 ⁽²⁾		1,002	$	1,002,000
Chris Ehrlich⁽³⁾		275	$	275,000

The following table summarizes the pre-funded warrants and February 2025 Common Warrants sold to our related party:

Purchasers		Pre-Funded Warrants Purchased				Total Purchase Price				February 2025 Common Warrants Issued
Atwood-Edminster Trust dtd 4-2-2000 and GVN, LLC ⁽²⁾			510,200			$	999,992				510,200

(1)

Daniel Corey served as the Chief Technology Officer and a member of the board of directors of the Company from February 2024 to September 2024, and previously served as Chief Executive Officer, Chief Scientific Officer, and a member of the board of directors of Legacy CERo until the closing of the Business Combination in February 2024.

(2)

Brian G. Atwood served as Chairman and Chief Executive Officer of the Company from February 2024 to September 2024, and previously served as Chairman of PBAX until the closing of the Business Combination in February 2024. Mr. Atwood is currently a member of the board of directors of the Company and serves as a trustee of Atwood-Edminster Trust dtd 4-2-2000. GVN, LLC, is a limited liability company of which the sole member is the Atwood-Edminster Trust dtd 4-2-2000, and of which Brian G. Atwood and Lynne H. Edminster are the managers.

(3)

Chris Ehrlich has served as the Chairman and Chief Executive Officer of the Company since December 2024, and previously served as (i) interim Chairman and Chief Executive Officer of the Company from October 2024 to November 2024, (ii) Vice Chairman of the board of directors of the Company from February 2024 to September 2024, and (iii) the Chief Executive Officer of PBAX until the closing of the Business Combination in February 2024.

During the three months ended March 31, 2025 and for the period from February 14, 2024 to March 31, 2024, the Company incurred a consulting fee of $60,000 and $15,000 to a member of the Company’s board of directors, respectively.

NOTE 14 – SUBSEQUENT EVENTS

During the period from April 1, 2025 to May 14, 2025, 23 shares of Series B Preferred Stock were converted into 63,281 shares of Common Stock. The conversion ratio was based on the Series B Certificate of Designations and reflected the applicable Alternate Conversion Price.

During the period from April 1, 2025 to May 14, 2025, 520 shares of Series C Preferred Stock were converted into 2,080,000 shares of Common Stock. The conversion ratio was based on the Series C Certificate of Designations and reflected the applicable Alternate Conversion Price.

During the period from April 1, 2025 to May 14, 2025, the Company sold 198,068 shares of Common Stock of the Company pursuant to the New Keystone Purchase Agreement for net proceeds of $124,353.

On April 9, 2025, the Company issued 211,000 shares of its common stock in connection with the exercise of pre-funded warrants.

Private Placement

On April 21, 2025, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain investors. Pursuant to the Securities Purchase Agreement, up to 10,000 shares of the Company’s Series D Preferred Stock, shall be purchased for an aggregate purchase price of up to $8 million in one or more closings (each a “Closing”). On April 22, 2025, pursuant to the Securities Purchase Agreement, the Company issued and sold, and the investors named therein purchased, in a private placement (the “Private Placement”): 6,250 shares of the Series D Preferred Stock for aggregate proceeds of approximately $5 million, paid through the transfer of certain Transfer Shares (as defined in the Securities Purchase Agreement) in lieu of cash. The date of the first closing is referred to as the “First Closing Date.” Each additional closing of the Private Placement is at the option of the investors upon notice to the Company and subject to satisfaction of customary closing conditions. On April 22, 2025, the Company filed the Certificate of Designations of Rights and Preferences of the Series D Preferred Stock (the “Certificate of Designations”) for the purpose of designating and establishing the Company’s Series D Preferred Stock. With respect to dividend rights and rights on liquidation, winding-up and dissolution, the Company’s Series D Convertible Preferred Stock shall rank (a) junior to the Senior Preferred Stock, (b) on parity with the Company’s Series C Preferred Stock and (c) senior to the Company’s Series A and Series B Preferred Stock.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations provides information that CERo Therapeutics Holdings, Inc. (“the Company”) management believes is relevant to an assessment and understanding of its results of operations and financial condition. The discussion should be read together with (i) the Company’s unaudited condensed consolidated financial statements and related notes that are presented above and (ii) the Company’s audited consolidated financial statements and related notes and management’s discussion and analysis of financial condition and results of operations included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 filed with the Securities and Exchange Commission (the “SEC”) on April 15, 2025. This Management’s Discussion and Analysis of Financial Condition and Results of Operations may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Actual results may differ materially from those anticipated in these forward-looking statements resulting from various factors. Please see “Cautionary Note Regarding Forward Looking Statements” and “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 and the subsequent Quarterly Report on Form 10-Q as filed with the SEC. Unless the context otherwise requires, references in this section to “Predecessor” is intended to mean the business and operations of CERo Therapeutics, Inc. prior to the Merger.

Overview

CERo Therapeutics, Inc. (the “Predecessor”) was incorporated in Delaware on September 23, 2016, and is based in South San Francisco, California. Predecessor was focused on developing its therapeutic platform to genetically engineer human immune cells to fight cancer and did not begin clinical development or product commercialization. The Company’s efforts will focus on continued product development, including clinical development, to support regulatory approval to commercialize and subsequent product commercialization.

On June 4, 2023, Predecessor entered into a Business Combination Agreement (as amended by that certain Amendment No. 1 to the Business Combination Agreement, dated as of February 5, 2024 and Amendment No. 2 to the Business Combination Agreement, dated as of February 13, 2024, the “Business Combination Agreement”) by and among PBAX and PBCE Merger Sub, Inc., pursuant to which Merger Sub merged with and into Predecessor, with Predecessor surviving as a wholly-owned subsidiary of PBAX (the “Merger”). In connection with the consummation of the Business Combination on February 14, 2024, PBAX changed its corporate name to “CERo Therapeutics Holdings, Inc.”

At the effective time of the Merger, (i) each outstanding share of Predecessor common stock, was cancelled and converted into the right to receive shares of Common Stock; (ii) each outstanding option to purchase Predecessor common stock was converted into an option to purchase shares of Common Stock, par value $0.0001 per share; (iii) each outstanding share of Predecessor preferred stock, was converted into the right to receive shares of Common Stock, and (iv) each outstanding warrant to purchase Predecessor preferred stock was converted into a warrant to acquire shares of Common Stock. In addition, each outstanding Predecessor convertible bridge note was exchanged for shares of Series A Preferred Stock.

In addition, the holders of Predecessor common stock and Predecessor preferred stock have the contingent right to receive the Earnout Shares. At the Closing, the Company issued three pools of shares of Common Stock subject to forfeiture if the applicable conditions to transferability thereof are not satisfied: (i) 12,000 shares of Common Stock (giving retroactive effect to the Reverse Stock Split), which will be fully vested upon the achievement of certain adjusted stock price-based earnout targets or upon a qualifying transaction (ii) 8,750 shares of Common Stock (giving retroactive effect to the Reverse Stock Split), pursuant to a Letter Agreement, dated as of February 14, 2024 which were fully vested at Closing of the Merger and which were issued as an offset to the Sponsor Share Forfeiture Agreement, and (iii) 10,000 shares of Common Stock (giving retroactive effect to the Reverse Stock Split), which were fully vested upon the June 28, 2024 achievement of certain regulatory milestone-based earnout targets.

As consideration for the Merger, the Company issued to Predecessor stockholders an aggregate of 84,483 shares of Common Stock, including 22,000 Earnout Shares and 3,733 shares issuable upon exercise of rollover options or warrants (giving retroactive effect to the Reverse Stock Split).

Going concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company’s ability to continue as a going concern is dependent on its ability to raise additional capital to fund its R&D activities and meet its obligations on a timely basis. As of March 31, 2025, the Company reported $5.1 million of cash and cash equivalents, with an accumulated deficit of $76.0 million.

On February 5, 2025, we entered into a securities purchase agreement, with participation from a member of the Board and a single institutional investor, for the purchase and sale of (i) 2,551,020 shares of Common Stock or Common Stock equivalents in lieu thereof; and (ii) February 2025 Common Warrants to purchase up to 2,551,020 shares of Common Stock at an exercise price of $1.96. In connection with such offering, we received net proceeds of approximately $4.3 million. Additionally, during the three months ended March 31, 2025, we received net proceeds from the exercise of the remaining Series A Preferred Warrants, the collection of subscriptions receivable and equity line of credit fundings of approximately $2.4 million.

Further, on April 21, 2025, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with certain accredited investors named therein. Pursuant to the Securities Purchase Agreement, up to 10,000 shares of the Company’s Series D Preferred Stock shall be purchased for an aggregate purchase price of up to $8 million in one or more closings (each a “Closing”). On April 22, 2025, pursuant to the Securities Purchase Agreement, the Company issued and sold, and the investors purchased, in a private placement (the “Private Placement”): 6,250 shares of the Series D Preferred Stock for aggregate proceeds of approximately $5 million, paid through the transfer of certain Transfer Shares (as defined in the Securities Purchase Agreement) in lieu of cash. The date of the first closing is referred to as the “First Closing Date.” Each additional closing of the Private Placement is at the option of the investors upon notice to the Company and subject to satisfaction of customary closing conditions. On April 22, 2025, the Company filed the Certificate of Designations of Rights and Preferences of the Series D Preferred Stock (the “Certificate of Designations”) for the purpose of designating and establishing the Company’s Series D Preferred Stock. Additional funds are necessary to maintain current operations and to continue R&D activities. However, there can be no assurance that sufficient funding will be available to allow the Company to successfully continue its R&D activities and planned regulatory filings with the FDA. If the Company is unable to obtain the necessary funds, significant reductions in spending and the delay or cancellation of planned activities may be necessary. These actions would have a material adverse effect on the Company’s business, results of operations, and prospects. These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year from the date these accompanying financial statements are issued. The accompanying financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

Recent Developments

Reverse Stock Split

At 12:01 a.m. Eastern time on January 8, 2025, we effected the Reverse Stock Split pursuant to which each 100 shares of our Common Stock outstanding immediately prior thereto was converted into 1 share of our Common Stock outstanding immediately thereafter.

February 2025 Offering

On February 7, 2025, we closed our reasonable best efforts public offering, with participation from a member of our board of directors and a single institutional investor, for the purchase and sale of (i) 2,551,020 shares of Common Stock or common stock equivalents in lieu thereof; and (ii) February 2025 Common Warrants to purchase up to 2,551,020 shares of common stock, at a combined public offering price of $1.96 per share and warrant. In connection with the offering, on February 5, 2025, we entered into the SPA with the investors. Such transaction is referred to as the “February 2025 Offering.” The shares of Common Stock and the Warrants described above and the shares of Common Stock underlying the Warrants were offered pursuant to the Registration Statement on Form S-1 (File No. 333-284007), as amended, which was declared effective by the Securities and Exchange Commission on February 5, 2025. In connection with this offering, we received net proceeds of approximately $4.3 million.

April 2025 PIPE Financing

On April 21, 2025, the Company consummated a private placement of 6,250 shares of Series D Preferred Stock pursuant to the Securities Purchase Agreement, for aggregate proceeds of approximately $5 million, paid through the transfer of certain Transfer Shares (as defined in the Securities Purchase Agreement) in lieu of cash, and agreed to issue up to 3,750 additional shares of Series D Preferred Stock for cash proceeds of up to $3 million at one or more additional closings. Each additional closing is at the option of the investors upon notice to the Company and subject to satisfaction of customary closing conditions.

On April 22, 2025, the Company filed the Certificate of Designations of Rights and Preferences of the Series D Preferred Stock (the “Certificate of Designations”) for the purpose of designating and establishing the Company’s Series D Preferred Stock. The Certificate of Designations was filed pursuant to the Securities Purchase Agreement, dated April 21, 2025, with certain accredited investors named therein. The Certificate of Designations became effective on April 22, 2025.

Investigational New Drug Application Submission

On June 28, 2024, the Company submitted an Investigational New Drug Application (“IND”) for its product candidate, CER-1236, to FDA. On July 26, 2024, the Company was informed by the FDA that it has placed a clinical hold on the IND. The FDA indicated that the clinical hold has been placed as a result of insufficient data provided with regard to two issues within pharmacology and toxicology of CER-1236. The FDA indicated that, within 30 calendar days, it would provide a detailed official hold letter and requested that the Company hold its response until after receipt of such letter (the “Hold Letter”).

The Company received the Hold Letter on July 26, 2024 and submitted a complete response letter to the FDA on October 21, 2024 in which the Company requested a meeting to address the FDA’s questions.

On November 15, 2024, the Company received notice from the FDA that the IND for CER-1236 was cleared. The Company began clinical trials in May 2025. We submitted a second IND application for the investigation of CER-T cell therapy in NSCLC and ovarian cancer, which was accepted by the FDA on March 27, 2025.

Nasdaq Notices of Non-compliance and Nasdaq Panel Decision

As previously disclosed, on January 17, 2025, the Company received a letter setting forth the determination of a panel convened by Nasdaq (the “Nasdaq Panel”) granting the Company’s request for an extension (the “Extension”) to regain compliance with certain continued listing requirements of the Nasdaq Stock Market until April 22, 2025 (the “Extension Date”). The Company presented its plan (the “Plan”) for regaining compliance with such requirements at a hearing conducted on December 17, 2025. The Company’s Plan included completion of a reverse stock split, which occurred on January 8, 2025, and transferring the listing of its securities to the Nasdaq Capital Market, which was completed on February 12, 2025, and certain other conditions, including the satisfaction of the $2.5 million minimum stockholders’ equity requirement for continued listing on the Nasdaq Capital Market.

In addition, as previously disclosed, from November 2024 through January 2025, the Company raised approximately $2.3 million of net proceeds from its equity line of credit entered into November 2024, and an additional approximately $4.3 million of net proceeds from its public offering of shares of common stock, pre-funded warrants and warrants to purchase shares of common stock that closed on February 7, 2025 (the “February 2025 Offering”). As a result of such capital raising activities and the proceeds of the Private Placement received on the First Closing Date, as well as successful negotiations with certain service providers to reduce outstanding balances payable, the Company received a notification letter from Nasdaq on May 7, 2025, stating that the Company to have regained compliance with the Nasdaq continued listing standard under Nasdaq Listing Rule 5550(b)(1), which requires, among other things, that the Company maintain at least $2.5 million in stockholders’ equity.

Results of Operations

Revenue

Predecessor and the Company have not recognized any revenue from any sources, including from product sales, and the Company does not expect to generate any revenue from the sale of products in the foreseeable future. If the development efforts for the Company’s product candidates, each of which is a specific product and indication combination, are successful and result in regulatory approval, or if the Company executes license agreements with third parties, the Company may generate revenue from R&D services, from the achievement of development milestones or from milestones and royalties related to product sales. However, there can be no assurance as to when any revenues will be generated, if at all.

Operating Expenses

Research and Development Expenses

R&D expenses consist of discovery activities, manufacturing development and production, preclinical and clinical development, and regulatory filing for product candidates. R&D expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in R&D are capitalized until the goods or services are received. Costs incurred in obtaining technology licenses through asset acquisitions, if incurred, will be charged to R&D expense if the licensed technology has not reached technological feasibility and has no alternative future use. R&D expenses include or could include:

●

employee-related expenses, including salaries, bonuses, benefits, stock-based compensation and other related costs for those employees involved in R&D efforts;

●

external R&D expenses incurred under agreements with preclinical research organizations, clinical research organizations, investigative sites, centralized clinical laboratories, and consultants to conduct preclinical and clinical studies;

●

costs related to manufacturing material for preclinical studies and clinical trials, including fees paid to contract development and manufacturing organizations;

●

product-liability insurance for clinical development product(s);

●

laboratory supplies and research materials;

●

software and systems related to R&D activities;

●

costs related to regulatory filing and compliance; and

●

facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent, maintenance of facilities, and equipment.

Product candidates in later stages of development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. The Company plans to substantially increase its R&D expenses for the foreseeable future as it continues the development of its product candidates through clinical development. The Company cannot determine with certainty the timing of initiation, the duration or the costs of current or future preclinical studies and clinical trials required for regulatory approval due to the inherently unpredictable nature of preclinical and clinical development. Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations. The Company anticipates that it will make determinations as to which product candidates to pursue and how much funding to direct to each product candidate on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and ongoing assessments as to each product candidate’s commercial potential. The Company will need to, and plans to, raise substantial additional capital in the future. Future R&D expenses may vary significantly between periods and from current expectations based on factors such as:

●

expenses incurred to conduct preclinical studies required to advance product candidates into clinical trials;

●

per patient clinical trial costs based on a number of factors, including number of patient clinical visits, clinical laboratory testing, and potential medical imaging;

●

the number of clinical trials required for approval, the number of patients who enroll in each clinical trial, and the number and geographic locations of sites included in the clinical trials;

●

the length of time required to screen and enroll eligible patients, screen-failure rate, or the discontinuation rates of enrolled patients;

●

potential additional safety monitoring requested by regulatory agencies;

●

the cost of insurance, including product liability insurance, in connection with clinical trials; and

●

suspension or termination of clinical development activities by regulators or institutional review boards for various reasons, including regulatory noncompliance or a finding that the participants are being exposed to unacceptable health risks.

General and Administrative Expenses

General and administrative expenses consist principally of salaries and related costs for personnel in executive and administrative functions, including stock-based compensation, travel expenses and recruiting expenses. Other general and administrative expenses include professional fees for legal, accounting and tax-related services, consulting fees, insurance costs, and investor relations fees.

The Company anticipates that its general and administrative expenses will increase in the future as the Company increases headcount and contracted services for operational support for expanded operations and infrastructure. The Company also anticipates that general and administrative expenses will increase as a result of expenses for accounting, audit, legal and consulting services, as well as costs associated with maintaining compliance with Nasdaq listing rules and SEC requirements, director and officer liability insurance, investor and public relations activities and other expenses associated with operating as a public company.

Other Income (Expense), Net

Other income (expense), net consists predominantly of interest income from interest bearing bank accounts, interest expense on payables, gains recorded on settlements reached with vendors on payables, and the gain or loss on the revaluation of earnout and derivative liabilities, which represents the change in fair value of earnout liabilities or outstanding warrants between periods.

Results of Operations for the Three Months Ended March 31, 2025 and 2024

The results of operations for the three months ended March 31, 2024 are pro forma as the period presented in the following table and discussion includes the Predecessor for the period from January 1, 2024 through February 13, 2024 and the Company for the period from February 14, 2024 through March 31, 2024. This pro forma period from January 1, 2024 to March 31, 2024 does not include the Merger transactions that occurred on-the-line.

	For the Three Months Ended March 31,
				2024
	2025 (Successor)			(Pro forma) (Predecessor and Successor)			Difference			Percentage Change
Operating expenses:
Research and development	$	2,907,827		$	1,668,207		$	1,239,620			74.3	%
General and administrative		2,042,704			2,883,863			(841,159	)		(29.2	)%
Total operating expenses		4,950,531			4,552,070			398,461			8.7	%
Loss from operations		(4,950,531	)		(4,552,070	)		(398,461	)		8.7	%

Other income (expense):
Gain from settlement of liabilities with vendor		-			141,888			(141,888	)		100.0	%
Change in fair value of derivative liabilities and earnout liabilities		-			2,120,117			(2,120,117	)		(100.0	)%
Share-based inducement expense		(156,250	)		-			(156,250	)		(100.0	)%
Interest income (expense), net		850			(9,629	)		10,479			108.8	%
Total other income (expense), net		(155,400	)		2,252,376			(2,407,776	)		(100.0	)%

Net loss		(5,105,931	)		(2,299,694	)		(2,806,237	)		122.0	%
Deemed dividend on Series A, B and C Preferred Stock		(264,144	)		-			(264,144	)		100	%
Deemed dividend related to Series C Common Warrants		(84,083	)		-			(84,083	)		100	%
Net loss attributable to common stockholders	$	(5,454,158	)	$	(2,299,694	)	$	(3,154,464	)		137.2	%

Research and Development Expenses

Research and development expenses were $2.9 million for the three months ended March 31, 2025 as compared to $1.7 million for the three months ended March 31, 2024, reflecting an increase of $1.2 million. The increase was primarily attributable to an increase in clinal expenses of approximately $1.3 million and an increase in scientific consulting fees of $0.4 million. During the three months ended March 31, 2025, we began clinical trials related to the IND for CER-1236. This increase was primarily offset by a decrease in lab expenses of approximately $0.3 million and a decrease in research and development salaries and benefits of approximately $0.1 million.

The Company anticipates that its R&D expenses will significantly increase in the future as the Company increases headcount, compensation expense, and contracted services for preclinical and clinical development of its product candidates, as well as for manufacturing of clinical product to be used in clinical development.

General and Administrative Expenses

General and administrative expenses were $2.0 million for the three months ended March 31, 2025 as compared to $2.9 million for the three months ended March 31, 2024, reflecting a decrease of approximately $0.8 million. The decrease during the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, was primarily due to a decrease of $1.8 million in underwriting fees from the PBAX initial public offering, which were incurred upon the consummation of the business combination in February 2024. This decrease was offset by an increase in executive salaries and benefits of $0.4 million, an increase in professional fees of $0.5 million primarily to an increase in auditing, accounting and legal fees which were offset by a decrease in recruiting fees. The additional professional fees were all driven by the increased expenses of operational compliance as a public company.

Other Income (Expense), Net

Other expense was $(0.2) million for the three months ended March 31, 2025 as compared to other income of $2.3 million for the three months ended March 31, 2024, reflecting a decrease of $2.4 million. The decrease was primarily due to the recording of a $1.8 million gain from change in value of the Company’s earnout liability and the $0.4 million gain recorded for the change in value of the Predecessor’s preferred stock warrant liability during the three months ended March 31, 2024 as compared to $0 during the three months ended March 31, 2025, and the recording of an inducement expense during the three months ended March 31, 2025. Additionally, settlement of vendor liabilities in 2024 resulted in a $0.1 million increase in other income during the three months ended March 31, 2024.

Net loss and net loss attributable to common stockholders

For the three months ended March 31, 2025 and 2024, net loss amounted to $5.1 million and $2.3 million, respectively, which represents an increase in net loss of $2.8 million, or 122.0%. During the three months ended March 31, 2025, in connection with our Series A and Series B preferred stock conversions, and the redemption of Series C Preferred Stock, we recorded deemed dividends of $0.3 million, and in connection with the adjustment in the exercise price of Series C Common Warrants, we recorded deemed dividends of $0.1 million. Accordingly, for the three months ended March 31, 2025 and 2024, net loss attributable to common stockholders amounted to $5.5 million, or $(1.59) per common share, and $2.3 million, or $(16.30) per common share, respectively.

Liquidity and Capital Resources

Capital Requirements

Predecessor and the Company have not generated any revenue from any source and the Company does not expect to generate revenue for at least the next few years. If the Company fails to complete the timely development of, or fails to obtain regulatory approval for, its product candidates, the ability of the Company to generate future revenue will be adversely affected. The Company does not know when, or if, it will generate any revenue from its product candidates, and does not expect to generate revenue unless and until the Company obtains regulatory approval and commercialization of its product candidates.

The Company expects its expenses to increase significantly in connection with its ongoing activities, particularly as it continues and expands research, preclinical development, and clinical development to support marketing approval for its product candidates. In addition, if the Company obtains approval for any of its product candidates, the Company expects to incur significant commercialization expenses related to sales, marketing, manufacturing and distribution. Furthermore, the Company expects to incur additional costs associated with operating as a public company.

The Company, therefore, anticipates that substantial additional funding will be needed in connection with its continuing operations. At March 31, 2025, the Company had $5.1 million in cash and cash equivalents. The Company intends to devote most of the available cash to the preclinical and clinical development of its product candidates and public company compliance costs. Based on current business plans, the Company believes that the cash available at March 31, 2025 will not fund its operations and capital requirements for 12 months after the filing of these unaudited condensed financial statements for the period ended March 31, 2025. The Company has arranged two equity lines of credit, one providing for the sale of up to 25,000,000 newly issued shares of Common Stock and the other providing for the purchase of up to $20.6 million of Common Stock on the satisfaction of certain conditions. The Company has no guarantee that the conditions will be satisfied to require the purchase of all, or any additional amount, of the ELOC funds. On February 5, 2025, the Company entered into the SPA, with participation from a member of the Company’s Board and a single institutional investor, for the purchase and sale of (i) 2,551,020 shares of our common stock or common stock equivalents in lieu thereof; and (ii) February 2025 Common Warrants to purchase up to 2,551,020 shares of common stock, at a combined public offering price of $1.96 per share and warrant. In connection with this offering, the Company received net proceeds of approximately $4.3 million. Additionally, during the three months ended March 31, 2025, the Company received net proceeds from the exercise of the remaining Series A Preferred Warrants, the collection of subscriptions receivable and ELOC fundings of approximately $2.4 million. Any estimate as to how long the Company expects the net proceeds from the ELOC funding may fund the Company’s operations is based on assumptions that may prove to be wrong, and the Company could use its available capital resources sooner than its current expectations. Changing circumstances, some of which may be beyond the Company’s control, could result in less cash and cash equivalents available to fund operations or cause the Company to consume capital significantly faster than currently anticipated, and the Company may need to seek additional funds from additional sources sooner than planned.

Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical drug products, the Company is unable to estimate the exact amount of its operating capital requirements. The Company’s future funding requirements will depend on many factors, including, but not limited to those listed under “Factors Affecting Our Performance” above.

Identifying potential product candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes many years to complete, and the Company may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, the Company’s product candidates, if approved, may not achieve commercial success. Commercial revenues, if any, will be derived from sales of product candidates that the Company does not expect to be commercially available in the near term, if at all. Accordingly, the Company will need to continue to rely on additional financing to achieve its business objectives. Adequate additional financing may not be available to the Company on acceptable terms, or at all. To the extent that the Company raises additional capital through the sale of equity or convertible debt securities, the terms of these equity securities or this debt may restrict the Company’s ability to operate. Any future debt financing and equity financing, if available, may involve covenants limiting and restricting the ability to take specific actions, such as incurring additional debt, making capital expenditures, entering into profit-sharing or other arrangements or declaring dividends. If the Company raises additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, it may be required to relinquish valuable rights to its technologies, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to the Company. If the Company is unable to raise capital when needed or on acceptable terms, the Company could be forced to delay, reduce or eliminate its R&D programs or future commercialization efforts.

Cash Flows

	For the Three Months Ended March 31,
				2024
	2025 (Successor)			(Pro forma, Predecessor and Successor)			Difference

Net cash used in operating activities	$	(4,445,667	)	$	(5,080,058	)	$	634,391
Net cash provided by financing activities:		6,322,144			7,157,766			(835,622	)
Net increase in cash and cash equivalents	$	1,876,477		$	2,077,708		$	(201,231	)

Net cash used in operating activities

Net cash used in operating activities for the three months ended March 31, 2025 primarily reflected a net loss of $5.1 million, adjusted for the reconciliation of non-cash items such as depreciation expense of $0.1 million, stock-based compensation of $0.3 million, inducement expense of $0.2 million, and amortization of right-of-use asset of $0.2 million, and changes in operating asset and liabilities primarily consisting of an increase in prepaid expenses and other current assets of $0.3 million, an increase in accounts payable of $0.7 million, a decrease in accrued liabilities of $0.3 million, and a decrease in operating lease liabilities of $0.2 million.

Net cash used in operating activities for the three months ended March 31, 2024 primarily reflected a net loss of $2.3 million, adjusted for the reconciliation of non-cash items such as a gain of settlement of liabilities with vendors of $0.1 million, depreciation expense of $0.1 million, stock-based compensation of $0.1 million, amortization of right-of-use asset of $0.2 million and a gain on revaluation of earnout liability and the preferred stock warrant liability of $2.1 million, and changes in operating asset and liabilities primarily consisting of an increase in prepaid expenses and other current assets of $0.5 million, a decrease in accounts payable of $0.3 million, an increase in accrued liabilities of $0.1 million, and a decrease in operating lease liabilities of $0.2 million.

Net cash provided by financing activities

Net cash provided by financing activities for the three months ended March 31, 2025 amounted to $6.3 million as compared to $7.2 million for the three months ended March 31, 2024.

During the three months ended March 31, 2025, net cash provided by financing activities of $6.3 million was primarily attributable to the receipt of net proceeds of $0.5 million from the exercise of Series A Preferred Warrants, net proceeds of $1.2 million from the sale of common stock under the ELOC, proceeds of $0.7 million from the collection of stock subscriptions receivable from previous sales of common stock under the ELOC, and net proceeds from sale of common stock and pre-funded warrants of $4.3 million. Offset by the cash redemption of Series C Preferred Stock of $0.4 million.

During the three months ended March 31, 2024, net cash provided by financing activities of $7.2 million was primarily attributable to the receipt of net proceeds of $6.8 million from the sale of Series A Preferred Stock and $0.4 million from short-term borrowings.

Critical Accounting Estimates

Earnout liability - As a result of the Merger in February 2024, the Company recognized an earnout liability of $4.9 million on the merger date. The earnout liability is measured using unobservable (Level 3) inputs and was included in current liabilities on balance sheet. The Company estimated the fair value of the earnout liability by applying a Monte-Carlo simulation method using the Company’s projection of future operating results and the estimated probability of achievement of the earnout target metrics. The Monte-Carlo simulation is a generally accepted statistical technique used to generate a defined number of valuation paths in order to develop a reasonable estimate of the fair value of the earnout liability. The liability is remeasured to fair value using the Monte-Carlo simulation method at each reporting period, and the change in fair value is recognized in other income (expense) until the contingency is resolved. During the three months ended March 31, 2024, the Company recorded a gain from change of fair value of the earnout liability of $1,800,000, which is included in other income (expenses), net on the accompanying consolidated statement of operations.

Stock-based compensation – The Company periodically issues common stock and stock options to officers, directors, and consultants for services rendered. Stock-based compensation accounting requires the recognition of stock-based compensation expense, using a grant date fair value-based method, for costs related to all share-based payments including stock options and restricted stock awards granted to employees and non-employees. Companies are required to estimate the fair value of all share-based payment awards on the date of grant using an option pricing model, and the Company uses a Black-Scholes option pricing model (“Black-Scholes”) to estimate option award fair value. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. The fair value of restricted stock awards is based upon the estimated share price of the common shares on the date of grant. Forfeitures are accounted for as they occur, and the Company applies the simplified method to estimate expected term of “plain vanilla” options. All options and restricted stock awards granted since inception are expensed on a straight-line basis over the requisite service period, which is usually the vesting period, or upon the completion of certain performance-based vesting terms and the related amounts are recognized in the consolidated statements of operations.

The accounting for stock options granted to outside consultants is consistent with the accounting for stock-based payments to officers and directors, as described above, by measuring the cost of services received in exchange for equity awards utilizing the grant date fair value of the awards, with the cost recognized as stock-based compensation expense on the straight-line basis in the Company’s financial statements over the vesting period of the awards.

Recent Accounting Standards

See the section titled in Note 2 to the Company’s condensed consolidated financial statements for the quarter ended March 31, 2025, appearing elsewhere herein.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

As a smaller reporting company, we are not required to provide the information required by this Item.

Item 4. Controls and Procedures

Disclosure controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Evaluation of Disclosure Controls and Procedures

As required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2025. Based upon their evaluation, as a result of the material weakness in internal control over financial reporting as described below, our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective as of March 31, 2025.

Our certifying officers concluded that the Company lacks effective processes and controls to ensure the accuracy and completeness of its financial statements due to the lack of sufficient and qualified resources. This material weakness led to the Company consistently failing to meet contractual deadlines for filing its financial statements. In order to remediate the material weakness, the Company plans to hire additional qualified accounting personnel when the Company has the financial resources to support such expenses, as well as engage consultants and purchase software licenses, if, and to the extent, that the Company has sufficient financial resources for such additional expenses.

Changes in Internal Control Over Financial Reporting

During the most recently completed fiscal quarter, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may become subject to various legal proceedings and claims that arise in the ordinary course of our business activities. Although the results of litigation and claims cannot be predicted with certainty, as of March 31, 2025, we do not believe we are party to any claim or litigation the outcome of which, if determined adversely to us, would individually or in the aggregate be reasonably expected to have a material adverse effect on our business. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Item 1a. Risk Factors

Except as set forth below, there have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on April 15, 2025. Any of these factors could result in a significant or material adverse effect on our results of operations or financial condition. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations.

The issuance of shares of our Common Stock upon conversion or exercise of our outstanding Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Common Warrants and other securities that we may issue in future financing transactions may result in substantial dilution to our stockholders.

As of May 14, 2025, the Company currently has outstanding (i) 1,429 shares of Series A Preferred Stock with a conversion value of approximately $1.4 million, convertible into shares of Common Stock at a conversion rate of the stated value thereof divided by a current effective conversion price of $1.96; (ii) 175 shares of Series B Preferred Stock with a conversion value of approximately $0.2 million, convertible into shares of Common Stock at a conversion rate of the stated value thereof divided by a floating conversion price of 80% of the lowest volume weighted average price during the five trading days immediately prior to conversion; (iii) 2,017 shares of Series C Preferred Stock th a stated value of approximately $2.0 million, convertible into shares of Common Stock at a conversion rate of the stated value thereof divided by a conversion price of $1.96 (iv) Series A Warrants to purchase 6,127 shares of Common Stock at an exercise price of $139.00 per share; (v) Series C Warrants to purchase 81,753 shares of Common Stock at an exercise price of $0.04; (vi) December 2024 and January 2025 Common Warrants to purchase an aggregate of 247,914 shares of Common Stock at an exercise price ranging from $5.61 to $5.82, (vii) February 2025 Common Warrants to purchase an aggregate of 2,551,020 shares of Common Stock at an exercise price of $1.96, (viii) Pre-Funded Warrants to purchase an aggregate of 215,740 shares of Common Stock at an exercise price of $0.0001, (ix) Public Warrants and Private Placement Warrants to purchase an aggregate of 91,925 shares of Common Stock at an exercise price of $1,150.00 per share and (x) 6,250 shares of Series D Preferred Stock with a conversion value of approximately $5 million, convertible into shares of Common Stock at a conversion rate of the stated value thereof divided by a current effective conversion price of $0.78.

Although each of the conversion price of most of the Preferred Shares and the exercise prices of the December 2024 Common Warrants, January 2025 Common Warrants, Series A Warrants and February 2025 Common Warrants are at or above the trading price of our Common Stock as of the date of this Quarterly Report, if such trading price increases, such conversion prices and exercise prices will not change as a result thereof and could be below the trading price of our Common Stock as of the date of any future conversion or exercise thereof, resulting in dilution to our stockholders. In addition, the terms of the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock and Series D Preferred Stock contain certain penalties and adjustments to the amount included in determination of the conversion rate following certain breaches of the Company’s obligations thereunder, including, among other things, as a result of a failure to file or cause the SEC to declare one or more registration statements relating to the resale of the shares of Common Stock issuable upon conversion thereof by specified deadlines, certain defaults under indebtedness of the Company or judgments against the Company and failure to deliver shares of Common Stock upon conversion in a timely manner. For example, the penalties and adjustments include a 25% premium added to the stated value for determining the conversion rate in connection with breaches other than the breach of the requirement to redeem the shares of Series A Preferred Stock and Series B Preferred Stock by August 14, 2025, which results in a 50% premium, and the addition to the stated value of an amount equal to the value of the shares of Common Stock into which the Series A Preferred Stock or Series B Preferred Stock would have been convertible if the conversion price were equal to 80% of the lowest volume weighted average price during the five trading days immediately prior to conversion. Such penalties and adjustments, which applied during the period when substantially all of the conversions since the Business Combination occurred as a result of a failure to file and cause the SEC to declare a registration statement with respect to the resale of the underlying shares in a timely manner, have resulted and may in the future result in the issuance of shares of Common Stock at an effective conversion price below the trading price of our Common Stock at the time of such conversion.

We cannot assure you that we will remain in compliance with all of the terms of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or Series D Preferred Stock and that such penalties and adjustments will not apply in the future. In addition, we cannot assure you that we will not issue additional convertible or other derivative securities with highly dilutive penalty or adjustment provisions. As described elsewhere in this Quarterly Report, the Company needs to obtain financing to fund its research and development activities and clinical trials, as well as other operations. Under challenging conditions in the equity capital markets, particularly for pre-commercialization biotech companies, we may have no viable alternatives to agreeing to inclusion of such provisions in the terms of future financings.

Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and stock price.

The global economy, including credit and financial markets, has experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates, increases in inflation rates, higher interest rates and uncertainty about economic stability. For example, the Russia-Ukraine war and the Israel-Hamas war created volatility in the global capital markets and may have further global economic consequences, including disruptions of the global supply chain and energy markets. The imposition of tariffs by the United States on imports from Canada, China and Mexico and retaliatory tariffs or other actions by the governments of such countries have also created economic uncertainty and disruptions in the capital markets. There have also been disruptions to the U.S. banking system due to bank failures in the past several years, including with respect to Silicon Valley Bank, Signature Bank and First Republic Bank. Any such volatility and disruptions may have adverse consequences on us or the third parties on whom we rely. If the equity and credit markets deteriorate, including as a result of political unrest or war, it may make any necessary debt or equity financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive. Increased inflation rates can adversely affect us by increasing its costs, including labor and employee benefit costs. In addition, higher inflation could also increase customers’ operating costs, which could result in reduced budgets for customers and potentially less demand for our products, if and when approved. Any significant increases in inflation and related increase in interest rates could have a material adverse effect on our business, results of operations and financial condition.

Recently there have been significant changes to U.S. trade policies, sanctions, legislation, treaties and tariffs, including, but not limited to, trade policies and tariffs affecting products from outside of the U.S. For example, in early 2025, the U.S. imposed blanket 10% tariffs on virtually all imports to the U.S. and significantly higher tariffs applicable to imports from many countries, plus tariffs on specific goods of between 7.5% and 100%, which have resulted in other countries imposing additional tariffs on imports from the U.S., and actions by the U.S. are likely to continue to result in retaliatory responses. On April 9, 2025, the U.S. announced a temporary pause on its tariffs applicable to many countries but has stated that it might continue to broadly impose tariffs, which could lead to corresponding punitive actions by the countries with which the U.S. trades. President Trump also has said that he was considering tariffs of 25% or more on pharmaceutical and other products. He indicated that such tariff rates might increase substantially over the course of the year to allow manufacturers a phase-in period to allow potential on-shoring of manufacturing. It is unclear at this time whether and to what extent such tariffs will take place, or how affected countries may react. Historically, tariffs have led to increased trade and political tensions. In response to tariffs, other countries have implemented retaliatory tariffs on U.S. goods. Political tensions as a result of trade policies could reduce trade volume, investment, technological exchange and other economic activities between major international economies, resulting in a material adverse effect on global economic conditions and the stability of global financial markets. Any further trade restrictions, retaliatory trade measures and additional tariffs could result in higher input costs to our investigational candidates. We may not be able to fully mitigate the impact of these increased costs, which could adversely impact our business. While tariffs and other trade measures imposed by other countries on U.S. goods have not yet had a significant impact on our business or results of operations, we cannot predict further developments, and such existing or future tariffs could have a material adverse effect on our results of operations, financial position and cash flows.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On January 6, 2025, 625 Series A Preferred Warrants were exercised into 625 shares of Series A Preferred Stock for gross cash proceeds of $500,000.

On January 6, 2025, the Company issued warrants to purchase an aggregate of 163,853 shares of Common Stock to a certain investor affiliated with each other to induce investors to exercise their Series A Preferred Warrants for cash (the “January 2025 Common Warrants”). The January 2025 Common Warrants are initially exercisable for cash at an initial exercise price equal to $5.82 (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations and similar events). The January 2025 Common Warrants are exercisable beginning six months after the issuance date (the “Initial Exercisability Date”) and expire on the third anniversary of the Initial Exercisability Date. The January 2025 Common Warrants require “buy-in” payments to be made by us for failure to deliver any shares of Common Stock issuable upon exercise. If at the time of exercise of the January 2025 Common Warrants, there is no effective registration statement registering the shares of the Common Stock underlying the January 2025 Common Warrants, such warrants may be exercised on a cashless basis pursuant to their terms.

On March 10, 2025, the Company redeemed 316 shares of Series C Preferred Stock from certain investors for a cash payment of $395,000, or $1,250 per share of Series C Preferred Stock.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

From time to time, our officers (as defined in Rule 16a–1(f)) and directors may enter into Rule 10b5-1 or non-Rule 10b5-1 trading arrangements (as each such term is defined in Item 408 of Regulation S-K). None of our directors or “officers,” as defined in Rule 16a-1(f) under the Securities Exchange Act of 1934, adopted or terminated a Rule 10b5-1 trading plan or arrangement or a non-Rule 10b5-1 trading plan or arrangement, as defined in Item 408(c) of Regulation S-K, during the fiscal quarter covered by this report.

Item 6. Exhibits

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

No.		Description of Exhibit
3.1		Second Amended and Restated Certificate of Incorporation of CERo Therapeutics Holdings, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K/A filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on February 27, 2024).

3.2		Second Amended and Restated Bylaws of CERo Therapeutics Holdings, Inc. (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K/A filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on February 27, 2024).

3.3		Certificate of Amendment to the Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on January 6, 2025).

3.4†		Certificate of Designation of Preferences, Rights and Limitations of the Series D Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on April 25, 2025).

4.1		Form of Common Warrant (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on February 6, 2025).

4.2		Form of Pre-Funded Warrant (incorporated by reference to Exhibit 4.8 to the Registration Statement on Form S-1/A filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on January 21, 2025).

10.1		Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on February 6, 2025).

10.2		Placement Agency Agreement, dated February 5, 2025, by and between CERo Therapeutics Holdings, Inc., and A.G.P./Alliance Global Partners (incorporated by reference to Exhibit 1.1 to the Current Report on Form 8-K filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on February 6, 2025).

10.3+†		Securities Purchase Agreement, dated as of April 21, 2025, by and between CERo Therapeutics Holdings, Inc. and the investors named therein (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on April 22, 2025).

10.4+		Form of Registration Rights Agreement by and between CERo Therapeutics Holdings, Inc. and the investors signatory thereto (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on April 22, 2025).

10.5		Form of Consent Agreement (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on April 22, 2025).

31.1*		Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rule 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*		Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rule 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1^		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2^		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*		Inline XBRL Instance Document

101.SCH*		Inline XBRL Taxonomy Extension Schema Document

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		Inline XBRL Taxonomy Extension Labels Linkbase Document

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File-the cover page interactive data is embedded within the Inline XBRL document or included within the Exhibit 101 attachments.

*	Filed herewith.

^	Furnished herewith.

+	Schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished to the SEC upon request.

†	Certain portions of this document that constitute confidential information have been redacted pursuant to Item 601(b)(10) of Regulation S-K.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CERO THERAPEUTICS HOLDINGS, INC.

Date: May 15, 2025	By:	/s/ Chris Ehrlich
	Name:	Chris Ehrlich
	Title:	Interim Chairman and Chief Executive Officer
		(Principal Executive Officer)

Date May 15, 2025	By:	/s/ Andrew Kucharchuk
	Name:	Andrew Kucharchuk
	Title:	Chief Financial Officer
		(Principal Financial and Accounting Officer)