Financial Position - As of September 30, 2025, the company reported approximately $1.9 million in cash and cash equivalents, with an accumulated deficit of approximately $86.3 million[283]. - The company has substantial doubt about its ability to continue as a going concern without additional funding for R&D activities[288]. - As of September 30, 2025, the company had approximately $1.9 million in cash and cash equivalents, which is expected to be insufficient to fund operations for the next 12 months[324]. Capital Raising Activities - The company raised approximately $4.4 million in net proceeds from its equity line of credit and an additional $4.2 million from a public offering that closed on February 7, 2025[296]. - The company entered into a Fourth Securities Purchase Agreement to issue and sell up to 10,000 shares of Series D Preferred Stock for an aggregate purchase price of up to $8 million[285]. - The company issued 6,250 shares of Series D Preferred Stock in exchange for 1,000,279 shares of Series D Preferred Stock of Stella Diagnostics, valued at $500,000[286]. - The company sold an additional 938 shares of Series D Preferred Stock for gross cash proceeds of $750,400 in June 2025[287]. - The company entered into a Fifth Securities Purchase Agreement to issue and sell up to 9,750 shares of Series E Preferred Stock for an aggregate purchase price of up to $7 million[294]. - The company has arranged two equity lines of credit, one for the sale of up to 25,000,000 shares of common stock and another for the purchase of up to $17.5 million of common stock[324]. - On October 14, 2025, the company entered into an agreement to issue and sell up to 9,750 shares of Series E Preferred Stock for an aggregate purchase price of up to $7 million[325]. Revenue and Expenses - The company has not recognized any revenue from product sales and does not expect to generate revenue in the foreseeable future[301]. - Research and development (R&D) expenses for Q3 2025 were $2,386,244, an increase of 34.5% from $1,774,210 in Q3 2024[309]. - General and administrative expenses decreased by 24.8% to $1,976,335 in Q3 2025 from $2,628,028 in Q3 2024[309]. - The total operating expenses for Q3 2025 were $4,362,579, a slight decrease of 0.9% compared to $4,402,238 in Q3 2024[309]. - The net loss for Q3 2025 was $4,856,395, representing a 14.9% increase from a net loss of $4,227,967 in Q3 2024[314]. - Net loss attributable to common stockholders for Q3 2025 was $11,506,223, a significant increase of 172.1% from $4,227,967 in Q3 2024[309]. - The company anticipates a significant increase in R&D expenses in the future due to expanded clinical development efforts[311]. - Other expenses for Q3 2025 were $(494,000), a negative change of $668,000 compared to other income of $174,000 in Q3 2024[313]. - The company recorded deemed dividends of $6,649,828 related to Series D Preferred Stock during Q3 2025[314]. - Research and development expenses increased to $8,048,000 for the nine months ended September 30, 2025, up from $6,157,000 in the same period of 2024, reflecting a 30.7% increase[316]. - General and administrative expenses decreased to $5,989,000 for the nine months ended September 30, 2025, down from $7,946,000 in the same period of 2024, representing a 24.6% decrease[319]. - Net loss for the nine months ended September 30, 2025, was $15,380,000, compared to a net loss of $8,976,000 for the same period in 2024, indicating a 71.3% increase in net loss[321]. - Net loss attributable to common stockholders amounted to $47,078,000 for the nine months ended September 30, 2025, compared to $8,976,000 in the same period of 2024, reflecting a 424.5% increase[321]. - Other expenses, net, were $(1,343,000) for the nine months ended September 30, 2025, compared to other income of $5,126,000 for the same period in 2024, showing a negative change of $6,469,000[320]. - The company anticipates significant increases in R&D expenses in the future due to expanded headcount and contracted services for clinical development[318]. Cash Flow - Net cash used in operating activities for the nine months ended September 30, 2025 was $(12,273,817), compared to $(11,375,873) for the same period in 2024, reflecting a difference of $(897,944)[329]. - The net loss for the nine months ended September 30, 2025 was $15,380,000, adjusted for non-cash items including depreciation expense of $215,000 and stock-based compensation of $836,000[330]. - Net cash provided by investing activities for the nine months ended September 30, 2025 amounted to $500,000, compared to $0 for the same period in 2024, due to the sale of equity securities[332]. - Net cash provided by financing activities for the nine months ended September 30, 2025 was $10,469,000, down from $12,241,000 in 2024[333]. - The financing activities in 2025 included net proceeds of $3,704,000 from the sale of common stock under the ELOC and $2,561,000 from the sale of Series D Preferred Stock[334]. - The net cash decrease in cash, restricted cash, and cash equivalents for the nine months ended September 30, 2025 was $(1,304,988), compared to an increase of $864,809 in 2024, resulting in a difference of $(2,169,797)[329]. Other Financial Information - The company recognized an earnout liability of $4.9 million as a result of the merger in February 2024, with a gain from the change in fair value of $4,870,000 recorded for the nine months ended September 30, 2024[337]. - Stock-based compensation for the nine months ended September 30, 2025 included expenses related to stock options and restricted stock awards, with the fair value estimated using the Black-Scholes model[338]. - The company recorded a gain of $5,190,000 on the revaluation of earnout liability and preferred stock warrant liability for the nine months ended September 30, 2024[331]. - The company’s investment in equity securities consists of Series D Preferred Stock of Stella Diagnostics, Inc., measured at cost or fair value based on observable price changes[336].

[PART 1 - FINANCIAL INFORMATION](index=10&type=section&id=PART%201%20-%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=10&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements for CERO Therapeutics Holdings, Inc. and its Predecessor, reflecting financial position and performance - The financial statements are unaudited and prepared in accordance with GAAP and SEC regulations[84](index=84&type=chunk) - The Company completed a merger on February 14, 2024, with CERo Therapeutics, Inc. (Predecessor) surviving as a wholly-owned subsidiary, and PBAX as the accounting acquirer[85](index=85&type=chunk)[86](index=86&type=chunk) - All historical share and per share information has been retroactively adjusted for 1-for-100 (Jan 8, 2025) and 1-for-20 (June 13, 2025) reverse stock splits[77](index=77&type=chunk)[78](index=78&type=chunk) [Condensed Consolidated Balance Sheets](index=10&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the Company's financial position, detailing assets, liabilities, and stockholders' deficit at specific dates Condensed Consolidated Balance Sheets Highlights | Metric | June 30, 2025 (Unaudited) | December 31, 2024 | Change | | :--------------------------------- | :------------------------ | :---------------- | :------- | | Total Assets | $6,202,322 | $6,206,929 | $(4,607) | | Total Liabilities | $7,836,223 | $8,101,492 | $(265,269) | | Total Stockholders' Deficit | $(1,633,901) | $(1,894,563) | $260,662 | | Cash, restricted cash, and cash equivalents | $3,302,674 | $3,327,060 | $(24,386) | | Accounts payable | $6,213,045 | $4,507,318 | $1,705,727 | | Series D convertible preferred stock | $7,240,180 | $- | $7,240,180 | [Condensed Consolidated Statements of Operations](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section outlines the Company's financial performance, including operating expenses, net loss, and earnings per share for the reported periods Condensed Consolidated Statements of Operations Highlights (Successor) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change (YoY) | % Change (YoY) | | :--------------------------------------- | :--------------------------- | :--------------------------- | :----------- | :------------- | | Research and development | $2,753,963 | $2,714,344 | $39,619 | 1.5% | | General and administrative | $1,969,828 | $2,433,893 | $(464,065) | (19.1)% | | Total operating expenses | $4,723,791 | $5,148,237 | $(424,446) | (8.2)% | | Loss from operations | $(4,723,791) | $(5,148,237) | $424,446 | (8.2)% | | Total other income (expenses), net | $(693,524) | $2,699,583 | $(3,393,107) | (125.7)% | | Net loss | $(5,417,315) | $(2,448,654) | $(2,968,661) | 121.2% | | Deemed dividend on Series A, B and C Preferred Stock | $(24,700,374) | $- | $(24,700,374) | 100.0% | | Net loss attributable to common shareholders | $(30,117,689) | $(2,448,654) | $(27,669,035) | 1,130.0% | | Net loss per common share (Basic and diluted) | $(61.71) | $(302.32) | $240.61 | (79.6)% | | Weighted average common shares outstanding | 488,076 | 8,099 | 479,977 | 5926.4% | Condensed Consolidated Statements of Operations Highlights (Successor & Predecessor) | Metric | 6 Months Ended June 30, 2025 (Successor) | 6 Months Ended June 30, 2024 (Pro forma) | Change (YoY) | % Change (YoY) | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :----------- | :------------- | | Research and development | $5,661,790 | $4,382,551 | $1,279,239 | 29.2% | | General and administrative | $4,012,532 | $5,317,756 | $(1,305,224) | (24.5)% | | Total operating expenses | $9,674,322 | $9,700,307 | $(25,985) | (0.3)% | | Loss from operations | $(9,674,322) | $(9,700,307) | $25,985 | (0.3)% | | Total other income (expense), net | $(848,924) | $4,951,959 | $(5,800,883) | (117.1)% | | Net loss | $(10,523,246) | $(4,748,348) | $(5,774,898) | 121.6% | | Deemed dividend on Series A, B and C Preferred Stock | $(24,964,518) | $- | $(24,964,518) | 100.0% | | Deemed dividend related to Series C Common Warrants | $(84,083) | $- | $(84,083) | 100.0% | | Net loss attributable to common stockholders | $(35,571,847) | $(4,748,348) | $(30,823,499) | 649.1% | | Net loss per common share (Basic and diluted) | $(107.60) | $(604.19) | $496.59 | (82.2)% | | Weighted average common shares outstanding | 330,603 | 7,859 | 322,744 | 4106.6% | [Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders' Deficit](index=12&type=section&id=Condensed%20Consolidated%20Statements%20of%20Convertible%20Preferred%20Stock%20and%20Stockholders'%20Deficit) This section details changes in convertible preferred stock and stockholders' deficit, reflecting equity transactions and accumulated losses - The Company's total stockholders' deficit improved from **$(1,894,563)** at December 31, 2024, to **$(1,633,901)** at June 30, 2025[65](index=65&type=chunk)[66](index=66&type=chunk) - Issuance of Series D Preferred Stock for cash and equity securities contributed **$7,240,180** to preferred stock[66](index=66&type=chunk) - Significant deemed dividends were recorded due to preferred stock conversions and warrant adjustments, increasing net loss attributable to common shareholders[65](index=65&type=chunk)[66](index=66&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=15&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the Company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows Highlights | Metric | 6 Months Ended June 30, 2025 (Successor) | 6 Months Ended June 30, 2024 (Successor & Predecessor) | Change | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :------- | | Net cash used in operating activities | $(9,068,702) | $(8,617,285) | $(451,417) | | Net cash provided by financing activities | $9,044,316 | $9,748,916 | $(704,600) | | Net (decrease) increase in cash and cash equivalents | $(24,386) | $1,131,631 | $(1,156,017) | | Cash, restricted cash and cash equivalents at end of period | $3,302,674 | $3,647,026 | $(344,352) | - Financing activities in H1 2025 included **$500,000** from Series A Preferred Warrants exercise, **$2,426,000** from ELOC common stock sales, **$2,240,000** from Series D Preferred Stock sales, and **$4,273,000** from common stock and pre-funded warrants sales, offset by **$395,000** for Series C Preferred Stock redemption[307](index=307&type=chunk) [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=17&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section provides detailed explanations and disclosures regarding the accounting policies, significant transactions, and financial instrument characteristics that underpin the condensed consolidated financial statements [NOTE 1 – ORGANIZATION AND DESCRIPTION OF THE BUSINESS](index=17&type=section&id=NOTE%201%20%E2%80%93%20ORGANIZATION%20AND%20DESCRIPTION%20OF%20THE%20BUSINESS) This note describes CERO Therapeutics Holdings, Inc.'s core business, clinical development progress, and going concern considerations - CERO Therapeutics Holdings, Inc. (CERO) is an innovative immunotherapy company focused on developing next-generation engineered T cell therapeutics for cancer[74](index=74&type=chunk) - FDA cleared IND for Phase 1 clinical trial of CER-1236 in AML in November 2024, with the first patient dosed in May 2025 and second in July 2025[75](index=75&type=chunk) - A second Investigational New Drug (IND) application for CER-T cell therapy in NSCLC and ovarian cancer was accepted by the FDA on March 27, 2025[76](index=76&type=chunk) - The Company's ability to continue as a going concern is dependent on raising additional capital, with an accumulated deficit of approximately **$81.4 million** as of June 30, 2025[80](index=80&type=chunk) [NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=19&type=section&id=NOTE%202%20%E2%80%93%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the Company's key accounting policies, including merger accounting, segment reporting, and recent accounting pronouncements - The Merger on February 14, 2024, was accounted for using the asset acquisition method, with PBAX considered the accounting acquirer[85](index=85&type=chunk) - The Company operates as a single operating and reporting segment, reflecting its sole focus on developing engineered T cell therapeutics for cancer[113](index=113&type=chunk) - The Company adopted ASU 2023-09, 'Income Taxes (Topic 740): Improvements to Income Tax Disclosures,' on January 1, 2025, with no impact on its consolidated financial statements[115](index=115&type=chunk) - ASU 2024-03, 'Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures,' is effective for fiscal years beginning after December 15, 2026, and is currently being assessed for impact[116](index=116&type=chunk) [NOTE 3 – BUSINESS COMBINATION](index=23&type=section&id=NOTE%203%20%E2%80%93%20BUSINESS%20COMBINATION) This note details the Business Combination (Merger) on February 14, 2024, including stock conversions, earnout shares, and accounting treatment - The Business Combination (Merger) closed on February 14, 2024, with PBAX changing its name to CERo Therapeutics Holdings, Inc[120](index=120&type=chunk) - Predecessor preferred stock converted into **2,208 shares** of Common Stock (**$21,635,926**), and common stock into **292 shares** (**$2,864,074**)[120](index=120&type=chunk) - Earnout shares were issued, including **600 restricted shares** subject to stock price/change of control vesting (**$5,880,000**), **438 shares** fully vested at closing (**$4,290,000**), and **500 shares** vested upon IND filing (**$4,900,000**)[120](index=120&type=chunk) - The Merger was accounted for as an asset acquisition, with **$45.6 million** in In-Process Research and Development (IPR&D) recorded[122](index=122&type=chunk)[123](index=123&type=chunk) [NOTE 4 – NET LOSS PER SHARE OF COMMON STOCK](index=25&type=section&id=NOTE%204%20%E2%80%93%20NET%20LOSS%20PER%20SHARE%20OF%20COMMON%20STOCK) This note explains the calculation of net loss per common share, including the treatment of dilutive securities - Dilutive securities, including convertible preferred stock, warrants, and stock options, are excluded from diluted EPS calculation during net loss periods as their effect would be anti-dilutive[127](index=127&type=chunk) - As of June 30, 2025, **881,026** potential common shares from convertible securities, stock options, and warrants were anti-dilutive and excluded from EPS calculation[128](index=128&type=chunk) [NOTE 5 – PROPERTY AND EQUIPMENT](index=26&type=section&id=NOTE%205%20%E2%80%93%20PROPERTY%20AND%20EQUIPMENT) This note provides details on the Company's property and equipment, including cost, accumulated depreciation, and net book value Property and Equipment, Net | Asset Category | June 30, 2025 | December 31, 2024 | | :------------- | :------------ | :---------------- | | 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 | $(2,171,785) | $(2,026,070) | | **Property and equipment, net** | **$382,806** | **$528,521** | - Depreciation expense for the six months ended June 30, 2025, was **$145,715** (Successor), compared to **$190,591** (Successor) for the period from February 14, 2024, through June 30, 2024[129](index=129&type=chunk) [NOTE 6 – ACCRUED LIABILITIES](index=26&type=section&id=NOTE%206%20%E2%80%93%20ACCRUED%20LIABILITIES) This note details the Company's accrued liabilities, including employee-related, legal, and consulting expenses Accrued Liabilities | Category | June 30, 2025 | December 31, 2024 | | :------- | :------------ | :---------------- | | Employee-related liabilities | $5,850 | $244,302 | | Accrued franchise taxes | $78,448 | $78,448 | | Accrued legal expenses | $- | $593,825 | | Insurance payable | $138,663 | $- | | Penalty for late S-1 filing and effectiveness | $55,000 | $55,000 | | Accrued consulting and professional services | $87,099 | $941,600 | | **Total Accrued Liabilities** | **$365,060** | **$1,913,175** | - Accrued liabilities significantly decreased by **$1,548,115** from December 31, 2024, to June 30, 2025, primarily due to decreases in employee-related liabilities, accrued legal expenses, and accrued consulting/professional services[130](index=130&type=chunk) [NOTE 7 – LEASES](index=27&type=section&id=NOTE%207%20%E2%80%93%20LEASES) This note describes the Company's operating lease for laboratory and office space, including lease costs and liabilities - The Company holds a five-year operating lease for laboratory and office space[131](index=131&type=chunk) - Total lease cost for the six months ended June 30, 2025, was **$871,266**, compared to **$620,875** for the same period in 2024 (Successor)[131](index=131&type=chunk) - Operating lease liabilities totaled **$1,152,618** as of June 30, 2025, with a weighted-average remaining lease term of **1.25 years**[131](index=131&type=chunk) [NOTE 8 – STOCKHOLDERS' DEFICIT](index=27&type=section&id=NOTE%208%20%E2%80%93%20STOCKHOLDERS'%20DEFICIT) This note details changes in stockholders' deficit, including transactions related to various series of convertible preferred stock and common stock issuances [Successor Series A Convertible Preferred Stock](index=27&type=section&id=Successor%20Series%20A%20Convertible%20Preferred%20Stock) This section outlines the conversion terms and deemed dividends related to the Company's Series A Preferred Stock - The Series A Preferred Stock conversion price was reset to **$2,000.00** due to adjustment provisions[135](index=135&type=chunk) - During H1 2025, **1,090 shares** of Series A Preferred Stock converted into **14,447 shares** of Common Stock, including a **25% premium** for penalties[143](index=143&type=chunk) - A deemed dividend of **$14,871,551** was recorded in H1 2025 due to a down-round triggering event from Series C Preferred Stock conversion, lowering Series A conversion price to **$1.76 per share**[143](index=143&type=chunk) [Successor Series B Convertible Preferred Stock](index=29&type=section&id=Successor%20Series%20B%20Convertible%20Preferred%20Stock) This section details the conversion of Series B Preferred Stock into Common Stock and associated deemed dividends - During Q1 2025, **75 shares** of Series B Preferred Stock converted into **2,500 Common Stock**, and in Q2 2025, **198 shares** converted into **42,258 Common Stock**, both including a **25% premium**[150](index=150&type=chunk) - A deemed dividend of **$482,953** was recorded in H1 2025 due to a down-round triggering event, lowering Series B conversion price to **$1.76 per share**[150](index=150&type=chunk) [Successor Series C Convertible Preferred Stock](index=31&type=section&id=Successor%20Series%20C%20Convertible%20Preferred%20Stock) This section covers the redemption and conversion of Series C Preferred Stock, including associated premiums and deemed dividends - In March 2025, **316 shares** of Series C Preferred Stock were redeemed for **$395,000**, including a **$127,144** cash redemption premium recorded as a deemed dividend[161](index=161&type=chunk) - In Q2 2025, **2,477 shares** of Series C Preferred Stock converted into **808,444 Common Stock** at conversion prices ranging from **$1.76 to $5.00**, triggering a stock-based inducement expense of **$707,300** and a deemed dividend of **$9,340,120** due to down-round events[162](index=162&type=chunk)[163](index=163&type=chunk) [Successor Series D Convertible Preferred Stock](index=33&type=section&id=Successor%20Series%20D%20Convertible%20Preferred%20Stock) This section details the issuance and sales of Series D Preferred Stock, including exchanges for other securities and cash proceeds - Issued **6,250 shares** of Series D Preferred Stock in April 2025 in exchange for Stella Diagnostics, Inc. Series D Preferred Stock, valued at **$500,000**, resulting in a **$4.5 million** decrease to additional paid-in capital[186](index=186&type=chunk) - Sold an additional **938 shares** for **$750,400** (June 5, 2025) and **2,315 shares** for **$1,852,000** (June 25, 2025) in Fourth PIPE Financing closings[187](index=187&type=chunk)[188](index=188&type=chunk) [Purchase of Common Stock by Keystone Capital Partners under the Equity Line of Credit ("ELOC")](index=36&type=section&id=Purchase%20of%20Common%20Stock%20by%20Keystone%20Capital%20Partners%20under%20the%20Equity%20Line%20of%20Credit%20(%22ELOC%22)) This section reports on the Company's sales of common stock to Keystone Capital Partners under an Equity Line of Credit - Sold **14,531 common shares** for **$1,227,241** net proceeds in Q1 2025 and **75,064 common shares** for **$481,971** net proceeds in Q2 2025 under the November 2024 Keystone Purchase Agreement[193](index=193&type=chunk)[194](index=194&type=chunk) [Issuance of Common Stock to Arena Business Solutions Global SPC II, Ltd. ("Arena") for the Arena ELOC](index=37&type=section&id=Issuance%20of%20Common%20Stock%20to%20Arena%20Business%20Solutions%20Global%20SPC%20II,%20Ltd.%20(%22Arena%22)%20for%20the%20Arena%20ELOC) This section details the issuance of common stock to Arena as consideration for their commitment under the Arena ELOC - The Company issued **173 shares** of Common Stock to Arena valued at **$500,000** as consideration for Arena's commitment to purchase shares under the ELOC, recorded as deferred offering costs[195](index=195&type=chunk) [Sale of Pre-funded Warrants and Common Stock](index=37&type=section&id=Sale%20of%20Pre-funded%20Warrants%20and%20Common%20Stock) This section describes the public offering of common shares and pre-funded warrants, including net proceeds and conversion price resets - In February 2025, completed a public offering of **15,000 common shares** and **112,551 pre-funded warrants**, and common warrants to purchase **127,551 shares**, for net proceeds of approximately **$4.2 million**[196](index=196&type=chunk) - The offering triggered a reset of Series A and Series C Preferred Stock conversion prices to **$39.20 per share**[200](index=200&type=chunk) [NOTE 9 – WARRANTS](index=38&type=section&id=NOTE%209%20%E2%80%93%20WARRANTS) This note explains the accounting treatment and details of various warrants issued by the Company [Accounting for warrants](index=38&type=section&id=Accounting%20for%20warrants) This section outlines the Company's classification of warrants as either equity or liability instruments based on accounting guidance - The Company classifies warrants as either equity or liability instruments based on specific terms and accounting guidance (ASC 480 and ASC 815)[201](index=201&type=chunk) [Public and Private Placement Warrants (Successor)](index=38&type=section&id=Public%20and%20Private%20Placement%20Warrants%20(Successor)) This section details the outstanding Public and Private Placement Warrants, including their exercise price and equity classification - As of June 30, 2025, there were **4,596 Public and Private Placement Warrants** outstanding, each exercisable for one Common Stock share at **$23,000.00**, and are equity-classified[202](index=202&type=chunk)[206](index=206&type=chunk) [Series A Common Warrants (Successor) - February 2024](index=38&type=section&id=Series%20A%20Common%20Warrants%20(Successor)%20-%20February%202024) This section describes the Series A Common Warrants, including their adjusted exercise price and equity classification - The **306 Series A Common Warrants** have an exercise price adjusted to **$2,780.00 per share** and are recorded as equity[207](index=207&type=chunk)[212](index=212&type=chunk) [September 2024 Series C Common Warrants (Successor)](index=39&type=section&id=September%202024%20Series%20C%20Common%20Warrants%20(Successor)) This section details the Series C Common Warrants, including their exercise price adjustment due to a down-round provision and deemed dividend - The exercise price of the **4,088 Series C Common Warrants** was lowered to **$0.80 per share** on February 5, 2025, due to a down-round provision, resulting in an **$83,083** deemed dividend[213](index=213&type=chunk)[218](index=218&type=chunk) [December 2024 and January 2025 Common Warrants (Successor)](index=40&type=section&id=December%202024%20and%20January%202025%20Common%20Warrants%20(Successor)) This section describes the December 2024 and January 2025 Common Warrants issued to induce preferred warrant exercises - The Company issued **4,203 December 2024 Common Warrants** (exercise price **$112.20**) and **8,193 January 2025 Common Warrants** (exercise price **$116.40**) to induce Series A Preferred Warrants exercise; both are equity-classified[219](index=219&type=chunk)[220](index=220&type=chunk)[223](index=223&type=chunk) [Preferred Warrants](index=42&type=section&id=Preferred%20Warrants) This section reports on the exercise of Series A Preferred Warrants during the six months ended June 30, 2025 - During the six months ended June 30, 2025, the **625 remaining Series A Preferred Warrants** were exercised into **625 shares** of Series A Preferred Stock for gross proceeds of **$500,000**[230](index=230&type=chunk) [February 2025 Pre-funded Warrants and February 2025 Common Warrants](index=42&type=section&id=February%202025%20Pre-funded%20Warrants%20and%20February%202025%20Common%20Warrants) This section details the Pre-Funded Warrants and Common Warrants outstanding from the February 2025 Offering - As of June 30, 2025, **10,787 Pre-Funded Warrants** (exercise price **$0.002**) and **127,551 Common Warrants** (exercise price **$39.20**) were outstanding from the February 2025 Offering[232](index=232&type=chunk)[233](index=233&type=chunk) [NOTE 10 – FAIR VALUE MEASUREMENTS](index=43&type=section&id=NOTE%2010%20%E2%80%93%20FAIR%20VALUE%20MEASUREMENTS) This note explains the Company's fair value measurements for equity investments and earnout liabilities, including valuation methodologies - Investment in Stella Diagnostics, Inc. Series D Preferred Stock is measured at cost (**$500,000**) using the measurement alternative for equity securities without readily determinable fair values[234](index=234&type=chunk) - Earnout liability was initially **$4.9 million** at the February 2024 merger date, revalued to **$20,000** as of June 30, 2025, with a **$4.7 million** gain recorded in H1 2024[235](index=235&type=chunk)[237](index=237&type=chunk) - Fair value measurements for earnout liability use Level 3 unobservable inputs, based on Monte-Carlo simulation[235](index=235&type=chunk)[237](index=237&type=chunk) [NOTE 11 – STOCK-BASED COMPENSATION](index=44&type=section&id=NOTE%2011%20%E2%80%93%20STOCK-BASED%20COMPENSATION) This note details the Company's stock-based compensation plan, including option grants, valuation, and expense recognition - The 2024 Equity Incentive Plan (2024 Plan) was approved in March 2024, with shares reserved increasing to **100,000 additional shares** approved in May 2025[238](index=238&type=chunk) - Stock options granted in March and May 2025 totaled **70,904 shares**, valued at **$488,720** and **$351,862** respectively, using the Black-Scholes model[240](index=240&type=chunk)[241](index=241&type=chunk)[242](index=242&type=chunk) - Stock-based compensation expense for the six months ended June 30, 2025, was **$488,274** (**$127,123** R&D, **$361,151** G&A)[245](index=245&type=chunk) - Unamortized stock-based compensation expense was approximately **$1,379,000** as of June 30, 2025, expected to be recognized over a weighted average period of **1.7 years**[246](index=246&type=chunk) [NOTE 12 – 401(K) RETIREMENT SAVINGS PLAN](index=45&type=section&id=NOTE%2012%20%E2%80%93%20401(K)%20RETIREMENT%20SAVINGS%20PLAN) This note confirms that the Company made no contributions to its 401(k) retirement savings plan during the reported period - The Company did not make any contributions to its 401(k) retirement savings plan during the six months ended June 30, 2025[247](index=247&type=chunk) [NOTE 13 – RELATED-PARTY TRANSACTIONS](index=45&type=section&id=NOTE%2013%20%E2%80%93%20RELATED-PARTY%20TRANSACTIONS) This note discloses various transactions involving related parties, including participation in financings and consulting fees - Related parties participated in the February 2024 Series A PIPE Financing, purchasing Series A Preferred Stock[248](index=248&type=chunk)[249](index=249&type=chunk) - Related parties also participated in the February 2025 public offering, purchasing **25,510 pre-funded warrants** and **25,510 common warrants** for **$999,992**[250](index=250&type=chunk)[251](index=251&type=chunk) - A related party investor owned a portion of the Stella Diagnostics, Inc. Series D Preferred Stock exchanged for the Company's Series D Preferred Stock in April 2025[252](index=252&type=chunk) - Consulting fees of **$83,500** were incurred to board members during the six months ended June 30, 2025[253](index=253&type=chunk) [NOTE 14 – SUBSEQUENT EVENTS](index=46&type=section&id=NOTE%2014%20%E2%80%93%20SUBSEQUENT%20EVENTS) This note reports on significant events occurring after the reporting period, including new agreements and stock transactions - On July 11, 2025, the Company entered into a New Keystone Purchase Agreement to issue and sell **12,500,000 shares** of Common Stock[254](index=254&type=chunk) - On July 18, 2025, an additional **497 shares** of Series D Preferred Stock were sold for **$432,600**, and **53 shares** of Series C Preferred Stock converted into **10,600 Common Stock**[255](index=255&type=chunk) - On August 20, 2025, the Company sold **1,000,279 Stella D Preferred Stock** for **$500,000 cash**, confirming its fair value at June 30, 2025[256](index=256&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=47&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition, results of operations, and liquidity, highlighting key trends, uncertainties, and future outlook [Overview](index=47&type=section&id=Overview) This section provides a high-level summary of the Company's merger, strategic focus, and initial equity transactions - The Company (formerly PBAX) completed a merger with CERo Therapeutics, Inc. (Predecessor) on February 14, 2024, to focus on engineered T cell therapeutics for cancer[259](index=259&type=chunk)[260](index=260&type=chunk) - The Merger involved conversion of Predecessor stock/options/warrants into Common Stock/options/warrants of the Successor[260](index=260&type=chunk) - Earnout shares were issued to Predecessor stockholders, some vested at closing, others contingent on stock price or regulatory milestones[261](index=261&type=chunk) [Going concern](index=47&type=section&id=Going%20concern) This section addresses the Company's ability to continue operations, given its cash position, accumulated deficit, and reliance on future financing - As of June 30, 2025, the Company had approximately **$3.2 million** in cash and cash equivalents and an accumulated deficit of approximately **$81.4 million**[263](index=263&type=chunk) - The Company received approximately **$4.2 million** net proceeds from a February 2025 public offering and **$2.4 million** from ELOC fundings and Series A Preferred Warrants exercise in H1 2025[264](index=264&type=chunk) - Sales of Series D preferred stock generated approximately **$2.2 million** net proceeds in H1 2025[266](index=266&type=chunk) - These conditions raise substantial doubt about the Company's ability to continue as a going concern within one year[267](index=267&type=chunk) [Recent Developments](index=48&type=section&id=Recent%20Developments) This section highlights recent corporate actions, including stock splits, financing activities, regulatory designations, and Nasdaq compliance updates [Reverse Stock Splits](index=48&type=section&id=Reverse%20Stock%20Splits) This section reports on the Company's 1-for-100 and 1-for-20 reverse stock splits effected in January and June 2025 - The Company effected **1-for-100** (Jan 8, 2025) and **1-for-20** (June 13, 2025) reverse stock splits[268](index=268&type=chunk) [April 2025 PIPE Financing](index=48&type=section&id=April%202025%20PIPE%20Financing) This section details the April 2025 PIPE Financing, including the sale of Series D Preferred Stock for cash and equity exchanges - The Company agreed to sell up to **10,000 shares** of Series D Preferred Stock for up to **$8 million**[269](index=269&type=chunk) - Initial closing involved exchanging **6,250 shares** for Stella Diagnostics Series D Preferred Stock (valued at **$500,000**)[269](index=269&type=chunk) - Subsequent closings in June 2025 raised **$750,400** and **$1,852,000** in cash from additional Series D Preferred Stock sales[270](index=270&type=chunk)[271](index=271&type=chunk) [July 2025 ELOC Transaction](index=49&type=section&id=July%202025%20ELOC%20Transaction) This section reports on the Company's new Equity Line of Credit agreement entered into in July 2025 - On July 11, 2025, the Company entered into a New Keystone Purchase Agreement to sell **12,500,000 shares** of Common Stock[272](index=272&type=chunk) [Orphan Drug Designation](index=49&type=section&id=Orphan%20Drug%20Designation) This section announces the FDA Orphan Drug Designation for CER-1236 for the treatment of acute myeloid leukemia - In July 2025, CER-1236 received FDA Orphan Drug Designation for the treatment of acute myeloid leukemia[273](index=273&type=chunk) [Nasdaq Notices of Non-compliance and Nasdaq Panel Decision](index=49&type=section&id=Nasdaq%20Notices%20of%20Non-compliance%20and%20Nasdaq%20Panel%20Decision) This section details the Company's compliance with Nasdaq's listing requirements regarding stockholders' equity and minimum bid price - The Company regained compliance with Nasdaq's **$2.5 million** stockholders' equity requirement by May 7, 2025[275](index=275&type=chunk) - The Company regained compliance with Nasdaq's **$1.00 minimum bid price** requirement by July 7, 2025, and its Common Stock will continue to be listed[276](index=276&type=chunk) [Results of Operations](index=49&type=section&id=Results%20of%20Operations) This section analyzes the Company's financial performance for the three and six months ended June 30, 2025, compared to 2024, focusing on revenue, operating expenses (R&D, G&A), other income/expenses, and net loss - The Company has not recognized any revenue from product sales and does not expect to generate revenue in the foreseeable future[277](index=277&type=chunk) - Research and development expenses are expected to increase significantly due to continued preclinical and clinical development[279](index=279&type=chunk) - General and administrative expenses are anticipated to increase due to higher headcount, operational support, and public company compliance costs[283](index=283&type=chunk) [Revenue](index=49&type=section&id=Revenue) This section states that the Company has not generated revenue from product sales and does not anticipate doing so in the near future - The Company has not recognized any revenue from product sales and does not expect to generate revenue in the foreseeable future[277](index=277&type=chunk) [Operating Expenses](index=50&type=section&id=Operating%20Expenses) This section discusses the trends and components of the Company's research and development and general and administrative expenses [Research and Development Expenses](index=50&type=section&id=Research%20and%20Development%20Expenses%20(Operating%20Expenses)) This section outlines the components of R&D expenses and anticipates future increases due to clinical development - R&D expenses are expected to increase substantially in the foreseeable future as the Company continues clinical development of its product candidates[279](index=279&type=chunk) - R&D costs include employee-related expenses, external research, manufacturing, regulatory filing, and facility costs[280](index=280&type=chunk) [General and Administrative Expenses](index=51&type=section&id=General%20and%20Administrative%20Expenses%20(Operating%20Expenses)) This section describes the nature of G&A expenses and projects increases due to growth and public company requirements - General and administrative expenses are expected to increase due to higher headcount, expanded operations, and public company compliance costs[283](index=283&type=chunk) [Results of Operations for the Three Months Ended June 30, 2025 and 2024](index=51&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20June%2030,%202025%20and%202024) This section provides a detailed comparison of the Company's financial performance for the three-month periods ended June 30, 2025 and 2024 [Research and Development Expenses](index=51&type=section&id=Research%20and%20Development%20Expenses%20(3M)) This section analyzes the changes in R&D expenses for the three months ended June 30, 2025, compared to the prior year - R&D expenses increased by **$40,000** (**1.5%**) to **$2,754,000** for the three months ended June 30, 2025, compared to **$2,714,000** in 2024[286](index=286&type=chunk) - The increase was driven by **$1,056,000** in clinical expenses and **$93,000** in scientific consulting fees, offset by decreases in salaries and benefits (**$893,000**) and lab expenses (**$216,000**)[286](index=286&type=chunk) - Clinical trials related to the IND for CER-1236 began in the first quarter of 2025[286](index=286&type=chunk) [General and Administrative Expenses](index=51&type=section&id=General%20and%20Administrative%20Expenses%20(3M)) This section analyzes the changes in G&A expenses for the three months ended June 30, 2025, compared to the prior year - G&A expenses decreased by **$464,000** (**19.1%**) to **$1,970,000** for the three months ended June 30, 2025, compared to **$2,434,000** in 2024[288](index=288&type=chunk) - The decrease was primarily due to a **$505,000** reduction in salaries and benefits, including a **$478,000** decrease in stock-based compensation[288](index=288&type=chunk) [Other Income (Expense), Net](index=52&type=section&id=Other%20Income%20(Expense),%20Net%20(3M)) This section explains the significant change in net other income (expense) for the three months ended June 30, 2025 - Net other expense was **$(693,000)** in Q2 2025, a negative change of **$3,393,000** (**125.7%**) from net other income of **$2,700,000** in Q2 2024[289](index=289&type=chunk) - This change was due to the absence of a **$2.9 million** gain from earnout liability revaluation and a **$447,000** gain from vendor settlements in Q2 2025 (present in Q2 2024)[289](index=289&type=chunk) - Also impacted by a new **$707,300** stock-based inducement expense in Q2 2025 related to Series C Preferred Stock conversion[289](index=289&type=chunk) [Net loss and net loss attributable to common stockholders](index=52&type=section&id=Net%20loss%20and%20net%20loss%20attributable%20to%20common%20stockholders%20(3M)) This section analyzes the increase in net loss and net loss attributable to common stockholders for the three months ended June 30, 2025 - Net loss increased by **$2,968,000** (**121.2%**) to **$5,417,000** in Q2 2025 from **$2,449,000** in Q2 2024[290](index=290&type=chunk) - Net loss attributable to common stockholders increased by **$27,669,035** (**1,130.0%**) to **$30,117,000** in Q2 2025, primarily due to **$24,700,000** in deemed dividends on Series A, B, and C preferred stock conversions[290](index=290&type=chunk) - Basic and diluted net loss per common share was **$(61.71)** in Q2 2025, compared to **$(302.32)** in Q2 2024[290](index=290&type=chunk) [Results of Operations for the Six Months Ended June 30, 2025 and 2024](index=52&type=section&id=Results%20of%20Operations%20for%20the%20Six%20Months%20Ended%20June%2030,%202025%20and%202024) This section provides a detailed comparison of the Company's financial performance for the six-month periods ended June 30, 2025 and 2024 [Research and Development Expenses](index=52&type=section&id=Research%20and%20Development%20Expenses%20(6M)) This section analyzes the changes in R&D expenses for the six months ended June 30, 2025, compared to the prior year - R&D expenses increased by **$1,279,000** (**29.2%**) to **$5,662,000** for the six months ended June 30, 2025, compared to **$4,383,000** in 2024[293](index=293&type=chunk) - The increase was primarily due to **$2,362,000** in clinical expenses and **$496,000** in scientific consulting fees, as clinical trials for CER-1236 began[293](index=293&type=chunk) - Offset by decreases in lab expenses (**$461,000**), R&D salaries and benefits (**$989,000**, including **$723,000** in stock-based compensation), and other R&D costs (**$129,000**)[293](index=293&type=chunk) [General and Administrative Expenses](index=54&type=section&id=General%20and%20Administrative%20Expenses%20(6M)) This section analyzes the changes in G&A expenses for the six months ended June 30, 2025, compared to the prior year - G&A expenses decreased by **$1,305,000** (**24.5%**) to **$4,013,000** for the six months ended June 30, 2025, compared to **$5,318,000** in 2024[295](index=295&type=chunk) - Primarily due to a **$1,750,000** decrease in underwriting fees from the PBAX IPO incurred in February 2024[295](index=295&type=chunk) - Offset by a **$516,000** increase in professional fees (auditing, accounting, legal) due to public company operational compliance[295](index=295&type=chunk) [Other Income (Expense), Net](index=54&type=section&id=Other%20Income%20(Expense),%20Net%20(6M)) This section explains the significant change in net other income (expense) for the six months ended June 30, 2025 - Net other expense was **$(849,000)** in H1 2025, a negative change of **$5,801,000** (**117.1%**) from net other income of **$4,952,000** in H1 2024[296](index=296&type=chunk) - This change was due to the absence of a **$4.7 million** gain from earnout liability revaluation and a **$320,000** gain from preferred stock warrant liability revaluation in H1 2025 (present in H1 2024)[296](index=296&type=chunk) - Also impacted by the absence of a **$589,000** gain on vendor liability settlements and a new **$864,000** stock-based inducement expense in H1 2025[296](index=296&type=chunk) [Net loss and net loss attributable to common stockholders](index=54&type=section&id=Net%20loss%20and%20net%20loss%20attributable%20to%20common%20stockholders%20(6M)) This section analyzes the increase in net loss and net loss attributable to common stockholders for the six months ended June 30, 2025 - Net loss increased by **$5,775,000** (**121.6%**) to **$10,523,000** in H1 2025 from **$4,748,000** in H1 2024[297](index=297&type=chunk) - Net loss attributable to common stockholders increased by **$30,823,499** (**649.1%**) to **$35,572,000** in H1 2025[297](index=297&type=chunk) - This was primarily due to **$24,965,000** in deemed dividends on Series A, B, and C preferred stock conversions/redemptions and **$84,000** in deemed dividends related to Series C Common Warrants[297](index=297&type=chunk) - Basic and diluted net loss per common share was **$(107.60)** in H1 2025, compared to **$(604.19)** in H1 2024[297](index=297&type=chunk) [Liquidity and Capital Resources](index=54&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the Company's cash position, capital requirements, and ability to fund future operations [Capital Requirements](index=54&type=section&id=Capital%20Requirements) This section outlines the Company's funding needs, expected expense increases, and reliance on external financing - The Company has not generated revenue and expects expenses to increase significantly due to R&D, clinical development, and public company operating costs[298](index=298&type=chunk)[299](index=299&type=chunk) - As of June 30, 2025, cash and cash equivalents were approximately **$3.2 million**, which is insufficient to fund operations and capital requirements for **12 months**[300](index=300&type=chunk) - The Company relies on additional financing, including equity lines of credit (ELOCs) and preferred stock sales, but there's no assurance of sufficient funding[300](index=300&type=chunk)[302](index=302&type=chunk) [Cash Flows](index=56&type=section&id=Cash%20Flows) This section summarizes the Company's cash flows from operating, investing, and financing activities for the reported periods - Net cash used in operating activities was **$(9,068,702)** for H1 2025, compared to **$(8,617,285)** for H1 2024[303](index=303&type=chunk) - Net cash provided by financing activities was **$9,044,316** for H1 2025, compared to **$9,748,916** for H1 2024[303](index=303&type=chunk) - Net decrease in cash and cash equivalents was **$(24,386)** for H1 2025, a significant change from a **$1,131,631** increase in H1 2024[303](index=303&type=chunk) [Critical Accounting Estimates](index=57&type=section&id=Critical%20Accounting%20Estimates) This section describes key accounting estimates, including fair value measurements for equity investments, earnout liabilities, and stock-based compensation - Investment in equity securities is valued at cost using the measurement alternative for securities without readily determinable fair values, subject to observable price changes or impairment[309](index=309&type=chunk) - Earnout liability is measured at fair value using a Monte-Carlo simulation with unobservable (Level 3) inputs, revalued each period with changes recognized in other income/expense[310](index=310&type=chunk) - Stock-based compensation involves estimating the fair value of awards using the Black-Scholes model, expensed straight-line over the vesting period[311](index=311&type=chunk) [Recent Accounting Standards](index=57&type=section&id=Recent%20Accounting%20Standards) This section refers to Note 2 for details on recently adopted and not yet effective accounting pronouncements - Refer to Note 2 for information on recently adopted and not yet effective accounting pronouncements[313](index=313&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=58&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, the Company is not required to provide disclosures about market risk - The Company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[314](index=314&type=chunk) [Item 4. Controls and Procedures](index=58&type=section&id=Item%204.%20Controls%20and%20Procedures) This section reports on the effectiveness of disclosure controls and procedures, identifies material weaknesses in internal control over financial reporting, and outlines the remediation plan [Evaluation of Disclosure Controls and Procedures](index=58&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section states that disclosure controls and procedures were not effective due to material weaknesses in internal control over financial reporting - Disclosure controls and procedures were not effective as of June 30, 2025, due to the existence of material weaknesses in internal control over financial reporting[316](index=316&type=chunk) [Material Weaknesses Identified](index=58&type=section&id=Material%20Weaknesses%20Identified) This section identifies material weaknesses, including insufficient accounting expertise and inadequate processes for complex financial instruments - Identified material weaknesses include a lack of sufficient personnel with appropriate technical accounting expertise and inadequate processes for assessing and accounting for preferred stock conversions[317](index=317&type=chunk) - Deficiencies in the initial recognition and valuation of investments in equity securities were also identified as a material weakness[317](index=317&type=chunk) [Remediation Plan](index=58&type=section&id=Remediation%20Plan) This section outlines management's plan to remediate material weaknesses through personnel recruitment, consulting, and system enhancements - Management is developing a remediation plan including recruiting additional qualified accounting personnel, engaging third-party consultants, and implementing enhanced financial reporting systems and internal controls[318](index=318&type=chunk) [Changes in Internal Control Over Financial Reporting](index=58&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section confirms no material changes in internal control over financial reporting during the most recent fiscal quarter - There has been no change in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting during the most recently completed fiscal quarter[319](index=319&type=chunk) [PART II - OTHER INFORMATION](index=59&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=59&type=section&id=Item%201.%20Legal%20Proceedings) The Company states that it is not currently party to any legal proceedings or claims that are expected to have a material adverse effect on its business - As of June 30, 2025, the Company does not believe it is party to any legal proceedings or claims that would have a material adverse effect on its business[322](index=322&type=chunk) [Item 1A. Risk Factors](index=59&type=section&id=Item%201A.%20Risk%20Factors) This section updates key risks, including orphan drug designation, potential dilution, healthcare reform, tax law changes, and internal control weaknesses - While CER-1236 received FDA Orphan Drug Designation for AML in June 2025, exclusivity may not prevent competition, and regulations could change[324](index=324&type=chunk)[326](index=326&type=chunk)[327](index=327&type=chunk) - The issuance of shares from conversion/exercise of various preferred stocks and warrants may result in substantial dilution to stockholders, especially with penalty/adjustment provisions[328](index=328&type=chunk)[329](index=329&type=chunk)[330](index=330&type=chunk) - Changes in healthcare spending and policy, such as the Medicare Drug Price Negotiation Program (Inflation Reduction Act) and Medicaid reforms (One Big Beautiful Bill Act of 2025), could adversely affect revenue prospects and business model[331](index=331&type=chunk)[333](index=333&type=chunk)[334](index=334&type=chunk) - The One Big Beautiful Bill Act of 2025 (OBBBA) made significant changes to U.S. federal tax law, including R&D expense capitalization, which could adversely affect cash flow and financial performance[336](index=336&type=chunk) - Identified material weaknesses in internal control over financial reporting (lack of expertise, inadequate processes for complex instruments) could impair timely and accurate financial reporting[338](index=338&type=chunk)[340](index=340&type=chunk) - Failure to timely file reports can lead to ineligibility for Form S-3 registration statements, increasing transaction costs and limiting capital raising flexibility[343](index=343&type=chunk)[344](index=344&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=64&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports on unregistered sales of equity securities during the three months ended June 30, 2025, including conversions of Series B and Series C Preferred Stock into Common Stock, and the issuance of Series D Preferred Stock in private placements - **198 shares** of Series B Preferred Stock converted into **42,258 shares** of Common Stock in Q2 2025[345](index=345&type=chunk) - **2,477 shares** of Series C Preferred Stock converted into **808,444 shares** of Common Stock in Q2 2025 at conversion prices ranging from **$1.76 to $5.00**[346](index=346&type=chunk) - In April 2025, **6,250 shares** of Series D Preferred Stock were issued in exchange for Stella Diagnostics, Inc. Series D Preferred Stock valued at **$500,000**[347](index=347&type=chunk) - Additional sales of Series D Preferred Stock in June 2025 generated **$750,400** and **$1,852,000** in gross cash proceeds[348](index=348&type=chunk)[349](index=349&type=chunk) [Item 3. Defaults Upon Senior Securities](index=64&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The Company states that there were no defaults upon senior securities - There were no defaults upon senior securities[350](index=350&type=chunk) [Item 4. Mine Safety Disclosures](index=64&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The Company states that this item is not applicable to its operations - This item is not applicable to the Company[351](index=351&type=chunk) [Item 5. Other Information](index=64&type=section&id=Item%205.%20Other%20Information) The Company reports that no officers or directors adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter - No officers or directors adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the fiscal quarter ended June 30, 2025[352](index=352&type=chunk) [Item 6. Exhibits](index=65&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of, or incorporated by reference into, the Quarterly Report on Form 10-Q - The exhibits include various corporate governance documents (Certificates of Incorporation, Bylaws), forms of warrants, securities purchase agreements, registration rights agreements, and employment agreements[354](index=354&type=chunk)[355](index=355&type=chunk) [SIGNATURES](index=67&type=section&id=SIGNATURES)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) FORM 10-Q ☒ 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 juri ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2024 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-40877 CERO THERAPEUTICS HOLDINGS, INC. (Exact name of registrant as specified in its charter) Delaware 81-4182129 (State or other ju ...

Corporate Actions - CERo Therapeutics Holdings, Inc. completed a merger with Predecessor, resulting in the issuance of 7,597,638 shares of Common Stock, including 2,200,000 Earnout Shares[171]. - The Company raised approximately $10.0 million in February 2024 through a private placement of Series A Preferred Stock and common warrants[175]. - A reverse stock split of 1:40 was approved by stockholders to help regain compliance with Nasdaq listing requirements[186]. - The Company plans to evaluate options to resolve compliance deficiencies and maintain its Nasdaq listing[185]. Regulatory and Clinical Developments - The Company submitted an Investigational New Drug Application for CER-1236 on June 28, 2024, but faced a clinical hold due to insufficient data[178]. - The FDA cleared the IND for CER-1236 on November 15, 2024, with plans to initiate clinical trials by early 2025[179]. Financial Performance - The Company has not recognized any revenue from product sales and does not expect to generate revenue in the foreseeable future[190]. - For the three-month period ended September 30, 2024, total operating expenses were $4.4 million, an increase of 186% compared to $1.5 million for the same period in 2023[200]. - General and administrative expenses for the three-month period ended September 30, 2024, were $2.6 million, reflecting an increase of $2.4 million from $0.3 million in the same period in 2023[201]. - Research and development expenses for the three-month period ended September 30, 2024, were $1.8 million, up from $1.3 million in the same period in 2023, marking a 38% increase[202]. - The net loss for the three-month period ended September 30, 2024, was $4.2 million, compared to a net loss of $1.3 million for the same period in 2023, representing an increase of 214%[200]. - For the nine-month period ended September 30, 2024, total operating expenses were $14.1 million, an increase of 115% compared to $6.6 million for the same period in 2023[208]. - General and administrative expenses for the nine-month period ended September 30, 2024, were $7.9 million, reflecting an increase of $5.7 million from $2.3 million in the same period in 2023[209]. - Research and development expenses for the nine-month period ended September 30, 2024, were $6.2 million, up from $4.3 million in the same period in 2023, indicating a 44% increase[211]. - Other income for the nine-month period ended September 30, 2024, was $5.1 million, compared to $0.5 million for the same period in 2023, reflecting a significant increase of $4.6 million[213]. Cash Flow and Liquidity - As of September 30, 2024, the company had $3.4 million in cash and cash equivalents, which is expected to be insufficient to fund operations for the next 12 months[216]. - Net cash used in operating activities increased by $6.6 million from $4.8 million in the nine-month period ended September 30, 2023, to $11.4 million in 2024[221]. - Net cash provided by financing activities increased by $11.7 million from $0.6 million in the nine-month period ended September 30, 2023, to $12.2 million in 2024[223]. - The increase in financing activities was driven by net proceeds of $7.3 million from the issuance of Series A and B Preferred Stock and $4.3 million from the sale of common stock under the ELOC[223]. - The company reported a net increase in cash and cash equivalents of $864,809 for the nine-month period ended September 30, 2024, compared to a decrease of $4.3 million in 2023[220]. Operational Insights - The company anticipates significant increases in R&D expenses in the future due to increased headcount and contracted services for clinical development[203][212]. - Cash used in operating activities was offset by a larger non-cash adjustment for stock-based compensation of $1.9 million in the nine-month period ended September 30, 2024, compared to 2023[221]. - There were no contractual obligations or other commitments reported[224]. - The company does not believe that inflation had a material effect on its financial condition or results of operations for the period ended September 30, 2024[241]. - The company continues to qualify as an emerging growth company, allowing it to take advantage of reduced disclosure requirements[243]. - The company has not recorded any interest or penalties associated with income tax since inception[236].

Revenue and Financial Performance - CERo Therapeutics Holdings, Inc. has not recognized any revenue from product sales and does not expect to generate revenue in the foreseeable future[128]. - The company has not generated any revenue and does not expect to do so for at least the next few years until regulatory approval is obtained for its product candidates[147]. - The net loss for the three-month period ended June 30, 2024, was $2.4 million, compared to a net loss of $2.1 million for the same period in 2023, an increase of 17%[136]. - Interest and other income, net, was $2.7 million for the three-month period ended June 30, 2024, compared to $0.3 million for the same period in 2023, reflecting an increase of 800%[140]. - The Company reported a net cash increase of $1.1 million for the six months ended June 30, 2024, compared to a decrease of $2.9 million in the same period of 2023[153]. Research and Development Expenses - The company plans to substantially increase its R&D expenses as it continues the development of its product candidates through clinical development[130]. - Research and development expenses increased to $2.7 million for the three-month period ended June 30, 2024, compared to $1.2 million for the same period in 2023, reflecting a 125% increase[138]. - For the six-month period ended June 30, 2024, research and development expenses were $4.4 million, up from $3.0 million in the same period of 2023, indicating a 47% increase[145]. - The company anticipates significant increases in R&D expenses in the future due to expanded headcount and contracted services for clinical development[139]. - The company anticipates that future R&D expenses may vary significantly based on ongoing assessments of product candidates' commercial potential[130]. Compliance and Regulatory Matters - On June 28, 2024, the company submitted an Investigational New Drug Application for its product candidate, CER-1236, but the FDA placed a clinical hold due to insufficient data[121]. - The company received a letter from Nasdaq indicating that the closing bid price for its common stock has been below the minimum $1.00 per share required for continued listing[122]. - The company has until January 15, 2025, to regain compliance with the Bid Price Requirement and until October 29, 2024, for the Market Value of Publicly Held Shares Requirement[125]. - The company plans to actively monitor its stock price and may evaluate options to resolve deficiencies to maintain compliance with Nasdaq listing standards[126]. Financing and Cash Flow - The company completed a private placement in February 2024, raising approximately $10.0 million from the issuance of Series A Preferred Stock and warrants[120]. - Net cash used in operating activities increased by $5.4 million from $3.5 million in the six-month period ended June 30, 2023, to $8.9 million in 2024[155]. - Net cash provided by financing activities increased by $9.1 million from $0.6 million in the three-month period ended June 30, 2023, to $9.7 million in 2024[156]. - The Company has arranged two equity lines of credit, one for the sale of up to 25 million shares and another for the purchase of up to $25 million of Common Stock[150]. - The Company expects to continue relying on additional financing to achieve its business objectives, as commercial revenues from product candidates are not expected in the near term[152]. - The Company may need to seek additional funds sooner than planned due to changing circumstances affecting cash availability[150]. - The Company has no guarantee that conditions for the equity line of credit will be satisfied, which may impact its ability to fund operations[150]. - The Company’s future funding requirements are uncertain and depend on various factors, including research and development progress[151]. General and Administrative Expenses - General and administrative expenses rose to $2.4 million for the three-month period ended June 30, 2024, from $1.2 million in the same period of 2023, marking a 108% increase[137]. - General and administrative expenses for the six-month period ended June 30, 2024, were $5.3 million, compared to $1.9 million for the same period in 2023, reflecting a 179% increase[144]. Emerging Growth Company Status - The company qualifies as an "emerging growth company" under the JOBS Act, allowing it to delay the adoption of certain accounting standards until they apply to private companies[172]. - The company can present only two years of audited financial statements, reducing disclosure requirements in its financial reports[173]. - The company will cease to qualify as an emerging growth company if total annual gross revenues exceed $1.07 billion[175]. - The company has taken advantage of reduced reporting requirements in its Form 10-Q, which may differ from other public companies[175]. - The company is exempt from compliance with auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act[173]. - The company is allowed to reduce disclosure about executive compensation arrangements in its periodic reports[173]. - The company is exempt from holding non-binding advisory votes on executive compensation or golden parachute arrangements[173]. - The company may choose to take advantage of some but not all reduced reporting burdens[175]. - The market value of the company's Common Stock held by non-affiliates must exceed $700 million to be deemed a "large accelerated filer"[175]. - The company has not issued more than $1.0 billion of non-convertible debt over the prior three-year period[175].

Financial Performance - The Company reported total operating expenses of $4.55 million for the three-month period ended March 31, 2024, compared to $2.44 million for the same period in 2023, reflecting an increase of $2.11 million[137]. - The net loss for the three-month period ended March 31, 2024, was $2.30 million, compared to a net loss of $2.44 million for the same period in 2023, a decrease of $138,636[137]. - Interest and other income increased to $1.93 million in Q1 2024 from a net loss of $0.01 million in Q1 2023, reflecting a substantial increase of $1.94 million[141]. - Net cash used in operating activities rose to $5.08 million in Q1 2024 from $1.44 million in Q1 2023, an increase of $3.64 million[147]. - Net cash provided by financing activities increased to $7.16 million in Q1 2024 from an immaterial amount in Q1 2023, driven by the sale of Series A Preferred Stock[148]. Operating Expenses - Research and development expenses were $1.67 million for the three-month period ended March 31, 2024, down from $1.80 million in the same period of 2023, a decrease of $131,789[137]. - General and administrative expenses increased to $2.88 million for the three-month period ended March 31, 2024, compared to $0.63 million in the same period of 2023, an increase of $2.25 million[138]. - The Company anticipates future increases in general and administrative expenses due to headcount growth and compliance with public company requirements[132]. - The company anticipates a significant increase in R&D expenses in the future due to increased headcount and contracted services for clinical development[140]. Revenue and Future Expectations - The Company has not recognized any revenue from product sales and does not expect to generate revenue in the foreseeable future[126]. - The company has not generated any revenue and does not expect to do so for at least the next few years, pending regulatory approval of its product candidates[142]. - The company expects to incur significant commercialization expenses if any product candidates receive approval, impacting future financial performance[143]. - The company may face increased costs due to inflation affecting labor and clinical trial expenses, which could impact future operations[163]. Financing and Capital Structure - The Company completed a private placement in February 2024, raising approximately $10.0 million from the issuance of Series A Preferred Stock and warrants[125]. - The Company has established multiple earnout share pools totaling 2,875,000 shares, contingent on achieving specific regulatory and stock price milestones[121]. - The company had $4.6 million in cash and cash equivalents as of March 31, 2024, and does not expect this to fund operations for the next 12 months[144]. - The company has arranged two equity lines of credit, one for the sale of up to 2,977,070 shares and another for the purchase of up to $25 million of Common Stock[144]. Regulatory and Reporting Status - The Company qualifies as an "emerging growth company" under the JOBS Act, allowing it to delay the adoption of certain accounting standards until they apply to private companies[164]. - The Company can present only two years of audited financial statements along with required unaudited interim financial statements, resulting in reduced disclosure requirements[165]. - The Company will cease to qualify as an emerging growth company when it exceeds $1.07 billion in total annual gross revenues[166]. - The Company may also lose its status if the market value of its Common Stock held by non-affiliates exceeds $700 million as of the prior June 30th[166]. - The Company has issued more than $1.0 billion of non-convertible debt over the prior three-year period, which could affect its emerging growth company status[166]. - The Company has taken advantage of certain reduced reporting requirements in its Form 10-Q[166]. - The information contained in the Company's filings may differ from that of other public companies due to its reduced reporting burdens[166]. Merger and Share Issuance - The Merger between Predecessor and PBAX was consummated on February 14, 2024, resulting in the issuance of 7,597,638 shares of Common Stock to Predecessor stockholders[124].

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-40877 CERO THERAPEUTICS HOLDINGS, INC. (Exact name of registrant as specified in its charter) | Delaware | 81-4182129 | | --- | --- ...

[PART 1 – FINANCIAL INFORMATION](index=4&type=section&id=PART%201%20%E2%80%93%20FINANCIAL%20INFORMATION) This section presents the company's unaudited financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed financial statements, including the balance sheets, statements of operations, changes in stockholders' deficit, and cash flows, along with detailed notes explaining the company's organization, accounting policies, and significant financial events up to September 30, 2023 [Unaudited Condensed Balance Sheets](index=4&type=section&id=Unaudited%20Condensed%20Balance%20Sheets) Presents the company's financial position, detailing assets, liabilities, and stockholders' deficit at specific reporting dates Condensed Balance Sheet Highlights | Metric | September 30, 2023 (Unaudited) ($) | December 31, 2022 ($) | | :-------------------------------- | :----------------------------- | :------------------ | | Cash | $119,014 | $475,870 | | Prepaid expenses and other assets | $21,815 | $225,188 | | Money market funds held in Trust Account | $8,329,792 | — | | Restricted cash held in Trust Account | — | $41,665,974 | | **TOTAL ASSETS** | **$8,470,621** | **$42,367,032** | | Accounts payable and accrued expenses | $3,311,098 | $1,653,120 | | Income tax payable | $28,769 | $599,159 | | Shareholder redemption liability | — | $27,842,747 | | Working capital loan – related party | $1,395,000 | $650,000 | | Deferred underwriting fee payable | $9,150,000 | $9,150,000 | | **Total liabilities** | **$13,950,671** | **$39,898,341** | | Class A Common stock subject to possible redemption | $8,287,049 | $13,468,845 | | **Total stockholders' deficit** | **$(13,767,099)** | **$(11,000,154)** | [Unaudited Condensed Statements of Operations](index=5&type=section&id=Unaudited%20Condensed%20Statements%20of%20Operations) Details the company's financial performance over specific periods, including revenues, expenses, and net income or loss Condensed Statements of Operations Highlights | Metric | Three Months Ended Sep 30, 2023 ($) | Three Months Ended Sep 30, 2022 ($) | Nine Months Ended Sep 30, 2023 ($) | Nine Months Ended Sep 30, 2022 ($) | | :------------------------------------------------ | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | General and administrative expenses | $430,901 | $786,685 | $2,518,347 | $1,468,042 | | Loss from operations | $(429,801) | $(836,685) | $(2,563,647) | $(1,618,042) | | Interest income earned on marketable securities | $121,524 | $320,475 | $380,583 | $357,583 | | Unrealized gain on marketable securities | — | $661,176 | — | $915,859 | | **Net (loss) income** | **$(334,028)** | **$84,505** | **$(2,253,473)** | **$(405,061)** | | Basic and diluted net (loss) income per share, Class A common stock | $(0.05) | $0.00 | $(0.34) | $(0.02) | [Unaudited Condensed Statements of Changes in Stockholders' Deficit](index=6&type=section&id=Unaudited%20Condensed%20Statements%20of%20Changes%20in%20Stockholders%27%20Deficit) Outlines changes in the company's equity over time, reflecting net loss, redemptions, and stock conversions Changes in Stockholders' Deficit Highlights | Metric | December 31, 2022 ($) | September 30, 2023 ($) | | :------------------------------------------ | :------------------ | :------------------- | | Balance, Total Stockholders' Deficit | $(11,000,154) | $(13,767,099) | | Accretion for Class A Common Stock Subject to Redemption (9 months) | — | $(457,083) | | Net loss (9 months) | — | $(2,253,473) | | Conversion of Class B common stock to Class A common stock (shares) | 4,596,250 | (4,596,250) | | Excise tax liability accrued for Class A common stock redemptions | — | $(56,389) | [Unaudited Condensed Statements of Cash Flows](index=7&type=section&id=Unaudited%20Condensed%20Statements%20of%20Cash%20Flows) Summarizes cash inflows and outflows from operating, investing, and financing activities over specific periods Condensed Statements of Cash Flows Highlights (Nine Months Ended September 30) | Metric | 2023 ($) | 2022 ($) | | :------------------------------------------ | :----------- | :----------- | | Net loss | $(2,253,473) | $(405,061) | | Net cash used in operating activities | $(1,336,995) | $(719,147) | | Net cash provided by investing activities | $5,874,018 | $128,489 | | Cash withdrawn from Trust Account for redemptions | $5,638,879 | — | | Net cash used in financing activities | $(4,893,879) | — | | NET CHANGE IN CASH | $(356,856) | $(590,658) | | CASH, END OF PERIOD | $119,014 | $507,915 | | Accretion of Class A common stock subject to possible redemption (non-cash) | $457,083 | $982,271 | | Excise tax liability accrued for Class A common stock redemptions (non-cash) | $56,389 | — | [Notes to Condensed Financial Statements (Unaudited)](index=8&type=section&id=Notes%20to%20Condensed%20Financial%20Statements%20(Unaudited)) Provides detailed explanations of the company's accounting policies, organization, and significant financial events [Note 1 — Description of Organization and Business Operations and Liquidity](index=8&type=section&id=Note%201%20%E2%80%94%20Description%20of%20Organization%20and%20Business%20Operations%20and%20Liquidity) Describes the company's formation as a SPAC, its IPO, trust account activities, and current liquidity challenges including going concern issues - The Company was incorporated on **June 8, 2021**, as a blank check company (SPAC) to effect a business combination[23](index=23&type=chunk) - IPO was consummated on **October 8, 2021**, raising **$155,000,000** from **15,500,000 units** at **$10.00 per unit**[25](index=25&type=chunk) - Following IPO, **$178,500,000** was placed in a Trust Account, invested in U.S. government securities or money market funds[29](index=29&type=chunk) - Significant redemptions occurred: **16,211,702 shares** by **December 31, 2022**, and **523,341 shares** on **July 18, 2023**, for **$5,638,879**[39](index=39&type=chunk)[44](index=44&type=chunk) - Trust Account balance as of **September 30, 2023**, is **approximately $8.3 million**[45](index=45&type=chunk) - The company faces NASDAQ listing deficiencies for Market Value of Listed Securities (cured by Class B to Class A conversion) and Minimum Public Holders Rule (plan submitted)[50](index=50&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk) - Accrued **$56,389 excise tax liability** as of **September 30, 2023**, due to the 1% excise tax on stock repurchases under the Inflation Reduction Act of 2022[58](index=58&type=chunk) - As of **September 30, 2023**, the company had a **working capital deficit of $4,624,973** and projects insufficient funds for one year, raising substantial doubt about its ability to continue as a going concern[59](index=59&type=chunk)[60](index=60&type=chunk) [Note 2 — Summary of Significant Accounting Policies](index=15&type=section&id=Note%202%20%E2%80%94%20Summary%20of%20Significant%20Accounting%20Policies) Outlines the key accounting principles and methods used in preparing the financial statements, including cash, restricted cash, and equity classifications - The financial statements are prepared in accordance with U.S. GAAP for interim financial information and SEC rules[61](index=61&type=chunk) - The Company is an 'emerging growth company' and has elected to use the extended transition period for new accounting standards[64](index=64&type=chunk)[65](index=65&type=chunk) Cash and Restricted Cash Balances | Metric | September 30, 2023 (Unaudited) ($) | December 31, 2022 ($) | | :-------------------- | :----------------------------- | :------------------ | | Cash | $119,014 | $475,870 | | Restricted cash | — | $41,665,974 | | **Total cash and restricted cash** | **$119,014** | **$42,141,844** | - Assets in the Trust Account were held in money market funds as of **September 30, 2023**, classified as trading securities[70](index=70&type=chunk) - Shareholder redemption liability of **$27,842,747** as of **December 31, 2022**, was paid on **January 3, 2023**[71](index=71&type=chunk) - Class A common stock subject to possible redemption is classified as temporary equity, with changes in redemption value recognized immediately[78](index=78&type=chunk)[79](index=79&type=chunk) Class A Common Stock Subject to Possible Redemption | Date | Amount ($) | | :------------------------------------------ | :------------- | | December 31, 2022 | $13,468,845 | | Plus: Accretion of carrying value to redemption value (9 months) | $457,084 | | Less: Redemption | $(5,638,879) | | **September 30, 2023** | **$8,287,049** | - Warrants are equity-classified instruments[84](index=84&type=chunk) - The Company adopted ASU 2016-13 on **January 1, 2023**, with no material impact on its financial statements[85](index=85&type=chunk) [Note 3 — Initial Public Offering and Over-Allotment](index=19&type=section&id=Note%203%20%E2%80%94%20Initial%20Public%20Offering%20and%20Over-Allotment) Details the initial public offering, including the number of units sold and their composition - The Company sold **17,500,000 units** in its IPO (including over-allotment) at **$10.00 per unit**[87](index=87&type=chunk) - Each unit consists of one share of Class A common stock and one-half of a redeemable warrant[87](index=87&type=chunk) [Note 4 — Private Placement Warrants](index=20&type=section&id=Note%204%20%E2%80%94%20Private%20Placement%20Warrants) Describes the private placement of units and the parties involved in their purchase - **885,000 Private Placement Units** were sold at **$10.00 per unit**, generating **$8,850,000**[89](index=89&type=chunk) - Purchasers included the Sponsor, Cantor Fitzgerald & Co., and Cohen & Company Capital Markets[89](index=89&type=chunk) [Note 5 — Related Party Transactions](index=20&type=section&id=Note%205%20%E2%80%94%20Related%20Party%20Transactions) Details financial and operational arrangements with related parties, including the Sponsor and its affiliates - The Sponsor initially held **4,679,125 Founder Shares** and forfeited **82,875 shares** due to partial over-allotment exercise[90](index=90&type=chunk) - On **July 3, 2023**, the Sponsor converted **4,596,250 Class B common stock shares** into an equal number of Class A common stock shares[92](index=92&type=chunk) - Working Capital Loans from the Sponsor totaled **$1,395,000 outstanding** as of **September 30, 2023**, used to fund ongoing operations and extensions[94](index=94&type=chunk) - Monthly consulting fees to the CEO's spouse ended on **December 31, 2022**, with **$0 incurred** for the three and nine months ended **September 30, 2023**[95](index=95&type=chunk) - Monthly support service fees of **$20,000** to an affiliate of the Sponsor were suspended on **December 31, 2022**, and reinstated on **March 31, 2023**, with **$60,000 incurred** for the three months and **$140,000** for the nine months ended **September 30, 2023**[96](index=96&type=chunk) [Note 6 — Commitments and Contingencies](index=21&type=section&id=Note%206%20%E2%80%94%20Commitments%20and%20Contingencies) Outlines the company's contractual obligations, potential liabilities, and the proposed business combination agreement - Holders of Founder Shares, Private Placement Warrants, and warrants from Working Capital Loans are entitled to registration rights[97](index=97&type=chunk) - A deferred underwriting commission of **$9,150,000** is payable to the underwriter upon completion of a Business Combination[99](index=99&type=chunk) - On **June 4, 2023**, the Company entered into a Business Combination Agreement with CERo Therapeutics, Inc[100](index=100&type=chunk) - The Business Combination involves issuing **approximately 5.0 million shares** of Class A common stock to CERo holders, plus potential Earnout Shares[101](index=101&type=chunk) - The Sponsor and certain CERo stockholders have entered into support agreements to vote in favor of the Business Combination[102](index=102&type=chunk)[103](index=103&type=chunk) [Note 7 — Stockholders' Deficit](index=24&type=section&id=Note%207%20%E2%80%94%20Stockholders%27%20Deficit) Provides details on the company's common stock and warrants outstanding, including redemption terms Common Stock Outstanding (excluding redeemable shares) | Class | September 30, 2023 (shares) | December 31, 2022 (shares) | | :---------- | :----------------- | :------------------ | | Class A | 5,481,250 shares | 885,000 shares | | Class B | 0 shares | 4,596,250 shares | - As of **September 30, 2023**, there were **8,750,000 Public Warrants** and **442,500 Private Placement Warrants** outstanding[109](index=109&type=chunk) - Warrants become exercisable 30 days after the completion of a Business Combination at an exercise price of **$11.50 per share**[109](index=109&type=chunk) - Public Warrants may be redeemed at **$0.01 per warrant** if Class A common stock equals or exceeds **$18.00 per share** for 20 trading days within a 30-day period[111](index=111&type=chunk) [Note 8 — Fair Value Measurements](index=25&type=section&id=Note%208%20%E2%80%94%20Fair%20Value%20Measurements) Explains the methodology for fair value measurements of financial instruments, categorizing them by input levels - The Company uses a fair value hierarchy (Level 1, 2, 3) to classify assets and liabilities based on observable inputs[116](index=116&type=chunk)[117](index=117&type=chunk) Fair Value Measurements (September 30, 2023) | Asset | Level | Amount ($) | | :----------------- | :---- | :------------- | | Money Market Funds | 1 | $8,329,792 | [Note 9 — Subsequent Events](index=26&type=section&id=Note%209%20%E2%80%94%20Subsequent%20Events) Reports significant events that occurred after the reporting period but before the financial statements were issued - On **October 4, 2023**, the Sponsor deposited an additional **$22,949** into the Trust Account to extend the business combination deadline[122](index=122&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and operational results, detailing its status as a SPAC, recent developments including the proposed business combination with CERo Therapeutics, and critical discussions on liquidity, going concern, and accounting policies [Overview](index=27&type=section&id=Overview) Provides a brief introduction to Phoenix Biotech Acquisition Corp. as a blank check company and its primary objective - Phoenix Biotech Acquisition Corp. is a blank check company formed on **June 8, 2021**, to effect a business combination[125](index=125&type=chunk) [Recent Developments](index=28&type=section&id=Recent%20Developments) Summarizes key recent events, including the proposed business combination, stock conversions, and trust account activities - The Company entered into a Business Combination Agreement with CERo Therapeutics, Inc. on **June 4, 2023**[127](index=127&type=chunk) - On **July 3, 2023**, the Sponsor converted **4,596,250 shares** of Class B common stock into Class A common stock[129](index=129&type=chunk) - The business combination period was extended multiple times, with the Sponsor depositing funds into the Trust Account[130](index=130&type=chunk)[131](index=131&type=chunk) - **523,341 shares** of Class A common stock were redeemed on **July 18, 2023**, totaling **$5,638,879.48**[132](index=132&type=chunk) - The Trust Account balance as of **September 30, 2023**, is **approximately $8.3 million**[132](index=132&type=chunk) [Results of Operations](index=29&type=section&id=Results%20of%20Operations) Analyzes the company's financial performance, focusing on net loss and key expense and income drivers for the reported periods Net (Loss) Income | Period | 2023 ($) | 2022 ($) | | :------------------------------ | :----------- | :----------- | | Three Months Ended Sep 30 | $(334,028) | $84,505 | | Nine Months Ended Sep 30 | $(2,253,473) | $(405,061) | - Net loss for the nine months ended **September 30, 2023**, was primarily due to **$2,563,647** in general and administrative expenses and franchise taxes, partially offset by **$380,583** in interest income[136](index=136&type=chunk) [Liquidity and Going Concern](index=29&type=section&id=Liquidity%20and%20Going%20Concern) Discusses the company's cash position, funding sources, and the assessment of its ability to meet obligations for the foreseeable future - Initial IPO proceeds and private placement funds totaling **$178,500,000** were placed in the Trust Account[139](index=139&type=chunk) - Transaction costs amounted to **$12,729,318**, including **$9,150,000** of deferred underwriting fees[139](index=139&type=chunk) Liquidity Position (September 30, 2023) | Metric | Amount ($) | | :-------------------------------- | :----------- | | Cash in operating bank accounts | $119,014 | | Money market funds in Trust Account | $8,329,792 | | Working capital deficit | $4,568,584 | | Net cash used in operating activities (9 months) | $1,336,995 | - The Company projects insufficient funds to cover expenses for one year, raising substantial doubt about its ability to continue as a going concern[146](index=146&type=chunk) - Working Capital Loans from the Sponsor totaled **$1,395,000 outstanding** as of **September 30, 2023**[144](index=144&type=chunk) [Off-Balance Sheet Arrangements](index=30&type=section&id=Off-Balance%20Sheet%20Arrangements) Confirms the absence of any off-balance sheet arrangements that could materially affect the company's financial position - The Company has no off-balance sheet arrangements as of **September 30, 2023**[147](index=147&type=chunk) [Contractual Obligations](index=30&type=section&id=Contractual%20Obligations) Details the company's significant contractual commitments, including administrative fees and deferred underwriting commissions - The Company has an agreement to pay an affiliate of the Sponsor a monthly fee of **$20,000** for office space and administrative services, with a **$35,000 outstanding** balance as of **September 30, 2023**[148](index=148&type=chunk) - A deferred underwriting fee of **$9,150,000** is payable to the underwriter upon completion of a Business Combination[151](index=151&type=chunk) [Critical Accounting Policies](index=31&type=section&id=Critical%20Accounting%20Policies) Highlights the accounting policies that require significant judgment and estimation, such as warrants and redeemable common stock - Critical accounting policies include accounting for warrants (equity-classified), common stock subject to possible redemption (temporary equity), and net (loss) income per common share[153](index=153&type=chunk)[154](index=154&type=chunk)[155](index=155&type=chunk) [Recent Accounting Standards](index=32&type=section&id=Recent%20Accounting%20Standards) Reports on the adoption of new accounting standards and their impact on the company's financial statements - The Company adopted ASU 2016-13 on **January 1, 2023**, which did not have a material impact on its financial statements[156](index=156&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=32&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, the Company is not required to provide quantitative and qualitative disclosures about market risk - The Company is exempt from providing market risk disclosures as a smaller reporting company[158](index=158&type=chunk) [Item 4. Controls and Procedures](index=32&type=section&id=Item%204.%20Controls%20and%20Procedures) This section reports on the effectiveness of the company's disclosure controls and procedures and confirms no material changes in internal control over financial reporting during the quarter [Evaluation of Disclosure Controls and Procedures](index=32&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Details the assessment of the company's disclosure controls and procedures - The Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of **September 30, 2023**[160](index=160&type=chunk) [Changes in Internal Control Over Financial Reporting](index=32&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) Reports on any material changes in the company's internal control over financial reporting - There were no material changes in internal control over financial reporting during the most recently completed fiscal quarter[161](index=161&type=chunk) [PART II – OTHER INFORMATION](index=33&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This section provides additional disclosures on legal proceedings, risk factors, equity sales, defaults, and exhibits [Item 1. Legal Proceedings](index=33&type=section&id=Item%201.%20Legal%20Proceedings) The Company reported no legal proceedings as of the filing date - No legal proceedings were reported[164](index=164&type=chunk) [Item 1A. Risk Factors](index=33&type=section&id=Item%201A.%20Risk%20Factors) The Company stated that there have been no material changes to the risk factors previously disclosed in its Annual Report on Form 10-K - No material changes to the risk factors disclosed in the Annual Report on Form 10-K for the year ended **December 31, 2022**[165](index=165&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=33&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the initial public offering and private placement activities, including the gross proceeds generated, the allocation of funds to the Trust Account, and the associated offering costs [Unregistered Sale of Securities](index=33&type=section&id=Unregistered%20Sale%20of%20Securities) Confirms no unregistered sales of securities were reported during the period - No unregistered sales of securities were reported[166](index=166&type=chunk) [Use of Proceeds from IPO](index=33&type=section&id=Use%20of%20Proceeds%20from%20IPO) Details the application of funds generated from the initial public offering - The IPO generated gross proceeds of **$155,000,000** from **15,500,000 units** at **$10.00 per unit**[167](index=167&type=chunk) - Private placements generated an additional **$8,450,000** from **845,000 units** and **$400,000** from **40,000 units**[168](index=168&type=chunk)[169](index=169&type=chunk) - A total of **$178,500,000** was initially placed in the Trust Account[171](index=171&type=chunk) - Offering costs amounted to **$12,729,318**, including **$9,150,000** of deferred underwriting fees[170](index=170&type=chunk) - The Trust Account balance as of **September 30, 2023**, is **approximately $8.3 million** due to redemptions and extension deposits[171](index=171&type=chunk) [Item 3. Defaults Upon Senior Securities](index=33&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The Company reported no defaults upon senior securities - No defaults upon senior securities were reported[173](index=173&type=chunk) [Item 4. Mine Safety Disclosures](index=33&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company - Mine Safety Disclosures are not applicable to the Company[174](index=174&type=chunk) [Item 5. Other Information](index=34&type=section&id=Item%205.%20Other%20Information) The Company reported no other information - No other information was reported[175](index=175&type=chunk) [Item 6. Exhibits](index=35&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of, or incorporated by reference into, the Quarterly Report on Form 10-Q, including various agreements and certifications - Key exhibits include the Underwriting Agreement, Business Combination Agreement, Amended and Restated Certificate of Incorporation, Investment Management Trust Agreement, Registration Rights Agreement, Promissory Note, and various certifications (e.g., 31.1, 31.2, 32.1, 32.2)[178](index=178&type=chunk)[180](index=180&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 Washington, D.C. 20549 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FORM 10-Q For the transition period from to Commission File No. 001-40877 PHOENIX BIOTECH ACQUISITION CORP. (Exact name of registrant as specified in its charter) (Mark One) Indicate by check mark whether the regis ...