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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>As filed with the Securities and Exchange Commission
on December 20, 2024 </b></p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">

</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right"><b>Registration No. 333-&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 2pt solid; border-bottom: Black 1pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>UNITED STATES </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>SECURITIES AND EXCHANGE COMMISSION </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Washington, D.C. 20549 </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>FORM <ix:nonNumeric contextRef="c0" name="dei:DocumentType" id="ixv-34949">S-1</ix:nonNumeric></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>REGISTRATION STATEMENT</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b><i>UNDER </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b><i>THE SECURITIES ACT OF 1933 </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b><ix:nonNumeric contextRef="c0" name="dei:EntityRegistrantName" id="ixv-34950">CERO THERAPEUTICS HOLDINGS, INC.</ix:nonNumeric>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Exact name of registrant as specified in its
charter) </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr> <td style="vertical-align: top; width: 33%; border-bottom: black 1.5pt solid; text-align: center"><ix:nonNumeric contextRef="c0" format="ixt-sec:stateprovnameen" name="dei:EntityIncorporationStateCountryCode" id="ixv-60"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Delaware</b></span></ix:nonNumeric></td> <td style="vertical-align: bottom; width: 1%">&#160;</td> <td style="vertical-align: top; width: 32%; border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>2836</b></span></td> <td style="vertical-align: bottom; width: 1%">&#160;</td> <td style="vertical-align: top; width: 33%; border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>81-4182129</b></span></td></tr> <tr> <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>(State or other jurisdiction of<br/>
incorporation or organization)</b></span></td> <td style="vertical-align: bottom">&#160;</td> <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>(Primary Standard Industrial<br/>
Classification Code Number)</b></span></td> <td style="vertical-align: bottom">&#160;</td> <td style="vertical-align: top; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>(I.R.S. Employer<br/>
Identification No.)</b></span></td></tr> </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>201 Haskins Way, Suite 230</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>South San Francisco, CA 94080</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(215) 731-9450</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Address, including zip code, and telephone
number, including area code, of registrant&#8217;s principal executive offices) </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Chris Ehrlich</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Chief Executive Officer </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CERo Therapeutics Holdings, Inc. </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>201 Haskins Way, Suite 230 </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>South San Francisco, CA 94080</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Telephone: (215) 731-9450&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Name, address, including zip code, and telephone
number, including area code, of agent for service) </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b><i>Copies to: </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 50%; padding-right: 5.4pt; padding-left: 5.4pt">
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Stephen M. Davis </b></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Jeffrey A. Letalien </b></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Goodwin Procter LLP </b></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>620 Eighth Avenue</b></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>New York, NY 10018</b></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(212) 813-8800</b></p></td>
    <td style="width: 50%; padding-right: 5.4pt; padding-left: 5.4pt">
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Barry I. Grossman, Esq.</b></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Matthew Bernstein, Esq.</b></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Justin Grossman, Esq.</b></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Ellenoff Grossman &amp; Schole LLP</b></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>1345 Avenue of the Americas, 11th Floor</b></p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>New York, NY 10105</b></p></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0pt; text-align: justify"><b>Approximate date of commencement of proposed
sale to the public</b>: From time to time after this Registration Statement becomes effective.</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0pt; text-align: justify">If any of the securities being registered on this
Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box:
&#9746;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0pt; text-align: justify">If this Form is filed to register additional securities
for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering. &#9744;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0pt; text-align: justify">If this Form is a post-effective amendment filed
pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. &#9744;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0pt; text-align: justify">If this Form is a post-effective amendment filed
pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. &#9744;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0pt; text-align: justify">Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.
See the definitions of &#8220;large accelerated filer,&#8221; &#8220;accelerated filer,&#8221; &#8220;smaller reporting company,&#8221;
and &#8220;emerging growth company&#8221; in Rule 12b-2 of the Exchange Act.</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: bottom"> <td style="width: 25%; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Large accelerated filer</span></td> <td style="width: 25%; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9744;</span></td> <td style="width: 25%; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Accelerated filer</span></td> <td style="width: 25%; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9744;</span></td></tr> <tr style="vertical-align: bottom"> <td style="text-align: justify"><ix:nonNumeric contextRef="c0" format="ixt-sec:entityfilercategoryen" name="dei:EntityFilerCategory" id="ixv-201"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Non-accelerated filer</span></ix:nonNumeric></td> <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9746;</span></td> <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Smaller reporting company</span></td> <td style="text-align: justify"><ix:nonNumeric contextRef="c0" format="ixt:fixed-true" name="dei:EntitySmallBusiness" id="ixv-208"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9746;</span></ix:nonNumeric></td></tr> <tr style="vertical-align: bottom"> <td style="text-align: justify">&#160;</td> <td style="text-align: justify">&#160;</td> <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Emerging growth company</span></td> <td style="text-align: justify"><ix:nonNumeric contextRef="c0" format="ixt:fixed-true" name="dei:EntityEmergingGrowthCompany" id="ixv-216"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9746;</span></ix:nonNumeric></td></tr> </table><div>
</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0pt; text-align: justify">If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. <ix:nonNumeric contextRef="c0" format="ixt:fixed-false" name="dei:EntityExTransitionPeriod" id="ixv-34951">&#9744;</ix:nonNumeric>&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0pt; margin: 0pt; text-align: justify"><b>The registrant (the &#8220;Registrant&#8221;)
hereby amends this registration statement (this &#8220;Registration Statement&#8221;) on such date or dates as may be necessary to delay
its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><!-- Field: Rule-Page --><div style="margin-top: 0pt; margin-bottom: 0pt; width: 100%"><div style="font-size: 1pt; border-top: Black 1pt solid; border-bottom: Black 2pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><!-- Field: Page; Sequence: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="margin: 0pt">&#160;</p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0pt; text-align: justify"><span style="color: Red"><b>The information in
this preliminary prospectus is not complete and may be changed. These securities may not be issued until the registration statement filed
with the U.S. Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and
does not constitute the solicitation of an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="color: Red"><b>SUBJECT TO COMPLETION,
DATED DECEMBER 20, 2024</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>PRELIMINARY PROSPECTUS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img alt="" src="image_001.jpg"/></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CERO THERAPEUTICS HOLDINGS, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Up to [___] Shares of Common Stock</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Pre-Funded Warrants to Purchase up to [___]
Shares of Common Stock</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Common Warrants to Purchase up to [___] Shares
of Common Stock</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Up to [___] Shares of Common Stock Issuable
Upon Exercise of Pre-Funded Warrants and Common Warrants</b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We are offering up to [________]
shares of our common stock, par value $0.0001 per share (&#8220;Common Stock&#8221;), together with new common warrants (the &#8220;Offered
Common Warrants&#8221;) to purchase up to an aggregate of [___] shares of our Common Stock and an aggregate of [___] shares of our Common
Stock issuable upon exercise of the Offered Common Warrants. Each share of Common Stock, or pre-funded warrant in lieu thereof (&#8220;Pre-Funded
Warrants&#8221;), is being sold together with an Offered Common Warrant to purchase [___] share of Common Stock. Each Common Offered Warrant
will have an exercise price of $[___], will be immediately exercisable and will expire on the fifth anniversary of the original issuance
date.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We are also offering to certain
purchasers whose purchase of shares of Common Stock in this offering would otherwise result in the purchaser, together with its affiliates
and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding Common
Stock immediately following the consummation of this offering, the opportunity to purchase, if any such purchaser so chooses, Pre-Funded
Warrants to purchase up to [___] shares of Common Stock, in lieu of shares of Common Stock that would otherwise result in such purchaser&#8217;s
beneficial ownership exceeding 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding Common Stock. The public offering
price of each Pre-Funded Warrant and accompanying Offered Common Warrant will be equal to the price at which one share of Common Stock
and accompanying Offered Common Warrant is sold to the public in this offering, minus $0.001, and the exercise price of each pre-funded
warrant will be $0.001 per share. The Pre-Funded Warrants will be immediately exercisable and may be exercised at any time until all of
the Pre-Funded Warrants are exercised in full.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The shares of Common Stock,
or Pre-Funded Warrants in lieu thereof, and the accompanying Offered Common Warrants can only be purchased together in this offering but
will be issued separately and will be immediately separable upon issuance.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">This offering will terminate
on [___], 2024, unless we decide to terminate the offering (which we may do at any time in our discretion) prior to that date. We will
have one closing for all the securities purchased in this offering.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">As of December 16, 2024,
there were 333,580,498 shares of Common Stock outstanding on a fully-diluted basis after giving effect to the conversion of all outstanding
shares of our Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock (each as defined below) and the exercise
of all outstanding Warrants (as defined below) and options, of which [___] shares were held by non-affiliates (without taking into account
beneficial ownership or stock exchange limitations). If all of the [___] shares of Common Stock offered under this prospectus, including
the [___] shares of Common Stock issuable upon exercise of the Pre-Funded Warrants and Offered Common Warrants, were issued and outstanding
as of December [__], 2024 (without taking into account beneficial ownership or stock exchange limitations), such shares would represent
approximately [__]% of the total number of our fully-diluted shares of Common Stock outstanding and approximately [__]% of the total number
of our fully-diluted shares of Common Stock held by non-affiliates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">You should read this prospectus
and any prospectus supplement or amendment carefully before you invest in our securities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our Common Stock is listed
on Nasdaq under the symbol &#8220;CERO.&#8221; On December 18, 2024, the last quoted sale price for the shares of our Common Stock as
reported on the Nasdaq was $0.06 per share.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">

</p><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 2 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our existing public warrants
(the &#8220;Public Warrants&#8221;) are listed on Nasdaq under the symbol &#8220;CEROW,&#8221; and the last reported sale price of the
Public Warrants on Nasdaq on December 18, 2024 was $0.009 per Public Warrant. The Offered Common Warrants do not have the same terms and
conditions as our Public Warrants. The actual number of securities, and the combined offering price per share of Common Stock and the
accompanying Offered Common Warrants, and the exercise price for the accompanying Offered Common Warrants will be as determined between
us and investors at the time of pricing, and may be at a discount to the current market price of our Common Stock and the Public Warrants.
Therefore, the recent market prices used throughout this prospectus may not be indicative of the actual public offering price of the shares
of Common Stock and accompanying Offered Common Warrants. Currently, there is no public market for the Offered Common Warrants.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">

</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><b>We are an &#8220;emerging
growth company&#8221; under applicable federal securities laws and are subject to reduced public company reporting requirements.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We have engaged
JonesTrading Institutional Services LLC (&#8220;Jones&#8221; or the &#8220;placement agent&#8221;) to act as our exclusive placement agent
in connection with this offering. The placement agent has agreed to use its reasonable best efforts to arrange for the sale of the
securities offered by this prospectus. The placement agent is not purchasing or selling any of the securities we are offering and
the placement agent is not required to arrange the purchase or sale of any specific number of securities or dollar amount. We have
agreed to pay to the placement agent the placement agent fees set forth in the table below, which assumes that we sell all of the
securities offered by this prospectus. Since we will deliver the securities to be issued in this offering upon our receipt of
investor funds, there is no arrangement for funds to be received in escrow, trust or similar arrangement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">There is no minimum offering
requirement as a condition of closing of this offering. Because there is no minimum offering amount required as a condition to closing
this offering, we may sell fewer than all of the securities offered hereby, which may significantly reduce the amount of proceeds received
by us, and investors in this offering will not receive a refund in the event that we do not sell an amount of securities sufficient to
pursue our business goals described in this prospectus. In addition, because there is no escrow account and no minimum offering amount,
investors could be in a position where they have invested in our company, but we are unable to fulfill all of our contemplated objectives
due to a lack of interest in this offering.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Further, any proceeds from
the sale of securities offered by us will be available for our immediate use, despite uncertainty about whether we would be able to use
such funds to effectively implement our business plan. We will bear all costs associated with the offering. See &#8220;Plan of Distribution&#8221;
on page 183 of this prospectus for more information regarding these arrangements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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and&#160;Offered <br/>
Common <br/>
Warrant</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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Pre-Funded <br/>
Warrant&#160;and <br/>
Offered <br/>
Common <br/>
Warrant</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;</td><td style="width: 1%; text-align: left">&#160;</td></tr>
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    <td style="text-align: left">$</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify">Proceeds, before expenses, to us</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Delivery of the shares of
Common Stock, Pre-Funded Warrants and Offered Common Warrants offered hereby is expected to be made on or about [__], 2024, subject to
the satisfaction of customary closing conditions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><b>&#160;Investing in our
securities involves a high degree of risk. Before buying any securities, you should carefully read the discussion of the risks of investing
in our securities in &#8220;Risk Factors&#8221; beginning on page 9 of this prospectus.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><b>Neither the Securities
and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under this prospectus
or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><b>&#160;&#160;</b></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

</div><!-- Field: Rule-Page --><div style="margin: 0pt auto; width: 25%"><div style="font-size: 1pt; border-top: Black 1.5pt solid">&#160;</div></div><!-- Field: /Rule-Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 18pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>Jones</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>The date of this
prospectus is &#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; , 2024.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


</div><!-- Field: Page; Sequence: 3 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="margin: 0pt">&#160;</p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>TABLE OF CONTENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: bottom">
    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td>
    <td>&#160;</td>
    <td style="border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><b>p</b></span><b><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">age</span></b></td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in; width: 90%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><a href="#a_001">ABOUT THIS PROSPECTUS</a></span></td>
    <td style="width: 1%">&#160;</td>
    <td style="width: 9%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">ii</span></td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><a href="#a_002">MARKET AND INDUSTRY INFORMATION</a></span></td>
    <td>&#160;</td>
    <td style="text-align: center">iii</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><a href="#a_003">TRADEMARKS</a></span></td>
    <td>&#160;</td>
    <td style="text-align: center">iv</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><a href="#a_004">SELECTED DEFINITIONS</a></span></td>
    <td>&#160;</td>
    <td style="text-align: center">v</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><a href="#a_005">CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS</a></span></td>
    <td>&#160;</td>
    <td style="text-align: center">x</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><a href="#a_006">PROSPECTUS SUMMARY</a></span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase">1</span></td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><a href="#a_007">THE OFFERING</a></span></td>
    <td>&#160;</td>
    <td style="text-align: center">7</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><a href="#a_008">RISK FACTORS</a></span></td>
    <td>&#160;</td>
    <td style="text-align: center">9</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><a href="#a_009">USE OF PROCEEDS</a></span></td>
    <td>&#160;</td>
    <td style="text-align: center">69</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase">DETERMINATION OF OFFERING
    PRICE</span></td>
    <td>&#160;</td>
    <td style="text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><a href="#a_010">MARKET PRICE AND DIVIDEND INFORMATION</a></span></td>
    <td>&#160;</td>
    <td style="text-align: center">70</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_011">CAPITALIZATION</a></span></td>
    <td>&#160;</td>
    <td style="text-align: center">71</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_012">DILUTION</a></span></td>
    <td>&#160;</td>
    <td style="text-align: center">72</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><a href="#a_013">UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION</a></span></td>
    <td>&#160;</td>
    <td style="text-align: center">74</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><a href="#a_014">BUSINESS</a></span></td>
    <td>&#160;</td>
    <td style="text-align: center">84</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><a href="#a_015">MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF PBAX</a></span></td>
    <td>&#160;</td>
    <td style="text-align: center">123</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><a href="#a_016">MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF CERO</a></span></td>
    <td>&#160;</td>
    <td style="text-align: center">129</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><a href="#a_017">MANAGEMENT OF CERO</a></span></td>
    <td>&#160;</td>
    <td style="text-align: center">142</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><a href="#a_018">EXECUTIVE COMPENSATION</a></span></td>
    <td>&#160;</td>
    <td style="text-align: center">152</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><a href="#a_019">DIRECTOR COMPENSATION</a></span></td>
    <td>&#160;</td>
    <td style="text-align: center">158</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><a href="#a_020">PRINCIPAL STOCKHOLDERS</a></span></td>
    <td>&#160;</td>
    <td style="text-align: center">159</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><a href="#a_021">CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS</a></span></td>
    <td>&#160;</td>
    <td style="text-align: center">162</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><a href="#a_022">DESCRIPTION OF SECURITIES</a></span></td>
    <td>&#160;</td>
    <td style="text-align: center">164</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="#a_023">DESCRIPTION OF SECURITIES WE ARE OFFERING</a></span></td>
    <td>&#160;</td>
    <td style="text-align: center">178</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><a href="#a_024">SECURITIES ACT RESTRICTIONS ON RESALE OF OUR SECURITIES</a></span></td>
    <td>&#160;</td>
    <td style="text-align: center">182</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><a href="#a_025">PLAN OF DISTRIBUTION</a></span></td>
    <td>&#160;</td>
    <td style="text-align: center">183</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><a href="#a_026">LEGAL MATTERS</a></span></td>
    <td>&#160;</td>
    <td style="text-align: center">186</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><a href="#a_027">EXPERTS</a></span></td>
    <td>&#160;</td>
    <td style="text-align: center">186</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><a href="#a_028">WHERE YOU CAN FIND MORE INFORMATION</a></span></td>
    <td>&#160;</td>
    <td style="text-align: center">186</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase"><a href="#a_029">INDEX TO FINANCIAL STATEMENTS</a></span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; text-transform: uppercase">F-1</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_001"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>ABOUT THIS PROSPECTUS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">You should rely only on the
information contained in this prospectus, any amendment or supplement to this prospectus, and any related free writing prospectus prepared
by or on behalf of us or to which we have referred you. Neither we nor the placement agent have authorized anyone to provide you with
information that is different from, or in addition to, that contained in this prospectus, any amendment or supplement to this prospectus
and any related free writing prospectus prepared by or on behalf of us or to which we have referred you.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Neither we nor the placement
agent take responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you.
Neither we nor the placement agent will make an offer to sell these securities in any jurisdiction where such offer or sale is not permitted.
No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus,
any applicable prospectus supplement or any related free writing prospectus. You should assume that the information appearing in this
prospectus or any prospectus supplement is accurate as of the date on the front of those documents only, regardless of the time of delivery
of this prospectus or any applicable prospectus supplement, or any sale of a security. Our business, financial condition, results of operations
and prospects may have changed since those dates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Neither we nor the placement
agent have taken any action that would permit this offering, or possession or distribution of this prospectus, in any jurisdiction where
action for that purpose is required, other than in the United States. Persons who have come into possession of this prospectus in a jurisdiction
outside the United States are required to inform themselves about and to observe any restrictions relating to this offering and the distribution
of this prospectus applicable to that jurisdiction.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We may also provide a prospectus
supplement or post-effective amendment to the registration statement to add information to, or update or change information contained
in, this prospectus. Any statement contained in this prospectus will be deemed to be modified or superseded for purposes of this prospectus
to the extent that a statement contained in such prospectus supplement or post-effective amendment modifies or supersedes such statement.
Any statement so modified will be deemed to constitute a part of this prospectus only as so modified, and any statement so superseded
will be deemed not to constitute a part of this prospectus. You should read both this prospectus and any applicable prospectus supplement
or post-effective amendment to the registration statement together with the additional information to which we refer you in the sections
of this prospectus titled &#8220;<i>Where You Can Find More Information</i>.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">This prospectus contains
summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for
complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred
to herein have been filed or will be filed as exhibits to the registration statement of which this prospectus is a part (the &#8220;Current
Registration Statement&#8221;), and you may obtain copies of those documents as described below under &#8220;<i>Where You Can Find More
Information</i>.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Certain monetary amounts,
percentages and other figures included herein have been subject to rounding adjustments. Accordingly, figures shown as totals in certain
tables and charts may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the
text may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages that precede them.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Unless the context otherwise
requires, all references herein to &#8220;CERo,&#8221; &#8220;we,&#8221; &#8220;us,&#8221; or &#8220;our&#8221; refer to the business
and operations of Legacy CERo and its consolidated subsidiaries prior to consummation of the Business Combination and to CERo and its
consolidated subsidiaries following the consummation of the Business Combination. &#8220;Legacy CERo&#8221; refers to CERo Therapeutics,
Inc. prior to the consummation of the Business Combination.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-variant: small-caps"><b>&#160;</b></span></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><div><a id="a_002"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>MARKET AND INDUSTRY INFORMATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Certain information contained
in this document relates to or is based on studies, publications, surveys and other data obtained from third-party sources and our own
internal estimates and research. We believe these third-party sources to be reliable as of the date of this prospectus and we are responsible
for such information. Such information and data involves risks and uncertainties and is subject to change based on various factors, including,
potentially, those discussed under the section of this prospectus entitled &#8220;<i>Risk Factors</i>.&#8221; Furthermore, such information
and data cannot always be verified with complete certainty due to limits on the availability and reliability of raw data, the voluntary
nature of the data gathering process and other limitations and uncertainties inherent in any statistical survey. Additionally, while our
own internal research has not been verified by any independent source, we believe such research to be reliable and are responsible for
any information disclosed in this prospectus based upon such internal research.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-variant: small-caps"><b>&#160;</b></span></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: LowerRoman; Name: PageNo -->iii<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_003"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>TRADEMARKS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">This document contains references
to trademarks and service marks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus
may appear without the &#174; or &#8482; symbols, but such references are not intended to indicate, in any way, that the applicable licensor
will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. We do not intend our use
or display of other companies&#8217; trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship
of us by, any other companies.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: LowerRoman; Name: PageNo -->iv<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><div><a id="a_004"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>SELECTED DEFINITIONS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">As used in this prospectus,
unless otherwise noted or the context otherwise requires, references to the following capitalized terms have the meanings set forth below:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Arena</i>&#8221;
refers to Arena Business Solutions Global SPC II, Ltd. on behalf of and for the account of Segregated Portfolio #13 &#8211; SPC #13.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Arena Commitment
Shares</i>&#8221; refer to up to 1,000,000 shares of Common Stock issued to Arena as consideration for executing and delivering the Arena
Purchase Agreement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Arena Equity Financing</i>&#8221;
refers to the equity line of credit established by the Arena Purchase Agreement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Arena Purchase
Agreement</i>&#8221; refers to the Purchase Agreement, dated as of February 23, 2024, by and between CERo and Arena.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Board</i>&#8221;
refers to the board of directors of CERo.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Business Combination</i>&#8221;
refers to the transactions contemplated by the Business Combination Agreement, including the merger between Merger Sub and Legacy CERo.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Business Combination
Agreement</i>&#8221; refers to the Business Combination Agreement, dated as of June 4, 2023, as amended by Amendment No. 1, dated February
5, 2024 and Amendment No. 2, dated February 13, 2024, by and between PBAX, Merger Sub and Legacy CERo.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Bylaws</i>&#8221;
refers to the Amended and Restated Bylaws of CERo.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Charter</i>&#8221;
refers to CERo&#8217;s Second Amended and Restated Certificate of Incorporation, as filed with the Secretary of the State of Delaware
February 14, 2024.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Class A Common
Stock</i>&#8221; refers to the PBAX Class A common stock, par value $0.0001 per share.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Closing</i>&#8221;
refers to the closing of the Business Combination.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Commitment Shares</i>&#8221;
refers to the Arena Commitment Shares and the Keystone Commitment Shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Common&#160;Stock</i>&#8221;
refers to the common stock, par value $0.0001 per share, of CERo.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Common&#160;Warrants</i>&#8221;
refers to the Public Warrants, Private Placement Warrants, the Conversion Warrants, the Series A Warrants and the Series C Warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Conversion Warrants</i>&#8221;
refer to the warrants initially issued by CERo Therapeutics, Inc. and converted into warrants to purchase Common Stock in connection with
the Business Combination.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Convertible Bridge
Notes</i>&#8221; refer to the senior secured convertible notes issued by Legacy CERo to certain Legacy CERo Stockholders, which automatically
converted into shares of Common Stock upon Closing.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Danforth</i>&#8221;
refers to Danforth Advisors, LLC.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>DGCL</i>&#8221;
refers to the Delaware General Corporation Law, as may be amended from time to time.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>dollars</i>&#8221;
or &#8220;<i>$</i>&#8221; refers to U.S. dollars.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Earnout Shares</i>&#8221;
refer to the Primary Earnout Shares, the Secondary Earnout Shares and the Tertiary Earnout Shares, collectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: LowerRoman; Name: PageNo -->v<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Exchange Act</i>&#8221;
refers to the Securities Exchange Act of 1934, as amended.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>FDA</i>&#8221;
refers to the U.S. Food and Drug Administration, or any successor agency thereto.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Fee Modification
Agreements</i>&#8221; refers to the fee modification agreements between PBAX and certain third-party vendors and service providers, pursuant
to which such vendors received shares of Common Stock in lieu of certain payments due to such vendors prior to Closing.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>First PIPE Financing</i>&#8221;
refers to the private placement pursuant to which we issued and sold, and the PIPE Investors purchased, shares of Series A Preferred Stock,
the Series A Warrants and Preferred Warrants, on the terms and conditions set forth in the First Securities Purchase Agreement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>First PIPE Registration
Rights Agreement</i>&#8221; refers to the Registration Rights Agreement, dated as of February 14, 2024, by and between CERo and certain
PIPE Investors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>First Securities
Purchase Agreement</i>&#8221; refers to the Amended and Restated Securities Purchase Agreement, dated as of February 14, 2024, by and
among PBAX, Legacy CERo and certain PIPE Investors, pursuant to which CERo agreed to issue and sell 10,039 shares of Series A Preferred
Stock, 612,746 Series A Warrants and 2,500 Preferred Warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Initial Public
Offering</i>&#8221; refers to the initial public offering of PBAX, which closed on October 8, 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Investor Rights
Agreement</i>&#8221; refers to the Investor Rights and Lock-up Agreement, dated February 14, 2024, by and among CERo, the Sponsor, certain
Legacy CERo Stockholders and certain other parties.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Keystone</i>&#8221;
refers to Keystone Capital Partners, LLC.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Keystone Commencement
Date</i>&#8221; refers to the time when all of the conditions to our right to commence sales of Common Stock to Keystone set forth in
the respective Keystone Purchase Agreements have been satisfied.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Keystone Commitment
Amount</i>&#8221; refers to the $25,000,000 of shares of Common Stock that Keystone has committed to purchase pursuant to the Keystone
Purchase Agreements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Keystone Commitment
Shares</i>&#8221; refers to the 1,983,345 shares of Common Stock that have been issued to Keystone as consideration for Keystone entering
into the Keystone Purchase Agreements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Keystone Equity
Financing</i>&#8221; refers to the equity line of credit established by the Keystone Purchase Agreements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Keystone Purchase
Agreements</i>&#8221; refers to the Old Keystone Purchase Agreement and the New Keystone Purchase Agreement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#8221;<i>Keystone
Purchase Shares</i>&#8221; refers to the shares of Common Stock that CERo may elect to issue and sell to Keystone after the Keystone Commencement
Date.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Keystone Registration
Rights Agreements</i>&#8221; refers to the Old Registration Rights Agreement and the New Registration Rights Agreement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Legacy CERo</i>&#8221;
refers to CERo Therapeutics, Inc.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Legacy CERo&#160;common&#160;stock</i>&#8221;
refers to the common stock, par value $0.0001 per share, of Legacy CERo.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Legacy CERo preferred&#160;stock</i>&#8221;
refers to the preferred stock, par value $0.0001 per share, of Legacy CERo.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Legacy CERo options</i>&#8221;
refers to the options to purchase shares of Legacy CERo common stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Legacy CERo Stockholders</i>&#8221;
refers to the holders of Legacy CERo common stock and/or Legacy CERo preferred stock prior to the Business Combination.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Legacy CERo warrants</i>&#8221;
refers to the warrants to purchase shares of Legacy CERo preferred stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Liquidated Damages
Modification Agreement</i>&#8221; refers to the Liquidated Damages Modification Agreement, dated as of February 23, 2024, by and between
us and Danforth.</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Merger Sub</i>&#8221;
refers to PBCE Merger Sub, Inc., a Delaware corporation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Nasdaq</i>&#8221;
refers to the Nasdaq Stock Market LLC.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>New Keystone Registration
Rights Agreement</i>&#8221; refers to the Registration Rights Agreement, dated as of November 8, 2024, by and between CERo and Keystone.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>New Keystone Purchase
Agreement</i>&#8221; refers to the Common Stock Purchase Agreement, dated as of November 8, 2024, by and between CERo and Keystone.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Old Keystone Purchase
Agreement</i>&#8221; refers to the Common Stock Purchase Agreement, dated as of February 14, 2024, by and between PBAX and Keystone.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Old Keystone Registration
Rights Agreement</i>&#8221; refers to the Registration Rights Agreement, dated as of February 14, 2024, by and between CERo and Keystone.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>PBAX&#8221; </i>refers
to Phoenix Biotech Acquisition Corp., a Delaware corporation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>PBAX Class A Common
Stock</i>&#8221; refers to the Class A common stock, par value $0.0001 per share, of PBAX.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>PIPE Financings</i>&#8221;
refers to the First PIPE Financing, the Second PIPE Financing and the Third PIPE Financing.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>PIPE Investors</i>&#8221;
refer to the investors in the PIPE Financings.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>PIPE Registration
Rights Agreement</i>&#8221; refers to the First PIPE Registration Rights Agreement, the Second PIPE Registration Rights Agreement and
the Third PIPE Registration Rights Agreement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>PIPE Warrants</i>&#8221;
refer to the Series A Warrants, the Series C Warrants and the Preferred Warrants issued in the PIPE Financings.</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Preferred Stock</i>&#8221;
refers to the shares of preferred stock, par value $0.0001 per share, of CERo.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>&#8220;Preferred Shares</i>&#8221;
refer to the shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock issued in the PIPE Financings,
including the Warrant Preferred Shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Preferred Warrants</i>&#8221;
refer to warrants to purchase shares of Series A Preferred Stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Primary Earnout
Shares</i>&#8221; refer to the 1,200,000 shares of Common Stock issued to the holders of Legacy CERo common stock and Legacy CERo preferred
stock in connection with the Business Combination, 1,000,000 of which are subject to vesting upon the achievement of certain stock price-based
earnout targets and 200,000 of which are subject to vesting upon a change of control, respectively.</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Private Placement
Warrants</i>&#8221; refer to private placement warrants to purchase shares of Common Stock, at an exercise price of $11.50 per share,
that were originally sold in a private placement concurrently with the Initial Public Offering.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Public Warrants</i>&#8221;
refer to the warrants to purchase shares of Common Stock, at an exercise price of $11.50 per share, that were originally issued in the
Initial Public Offering.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Rollover Warrants</i>&#8221;
refer to warrants to purchase shares of Common Stock, at an exercise price of $10.00 per share, that were converted from Legacy CERo warrants
in connection with the Business Combination.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>SEC</i>&#8221;
refers to the U.S. Securities and Exchange Commission.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Secondary Earnout
Shares</i>&#8221; refer to the 875,000 shares of Common Stock issued to the holders of Legacy CERo common stock and Legacy CERo preferred
stock in connection with the Business Combination, which became fully vested at Closing.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Second PIPE Financing</i>&#8221;
refers to the private placement pursuant to which we issued and sold, and the PIPE Investors purchased, shares of Series B Preferred Stock,
on the terms and conditions set forth in the Second Securities Purchase Agreement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Second PIPE Registration
Rights Agreement</i>&#8221; refers to the Registration Rights Agreement, dated as of March 29, 2024, by and between CERo and certain PIPE
Investors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>&#8220;Second Securities
Purchase Agreement</i>&#8221; refers to the Securities Purchase Agreement, dated as of March 29, 2024, by and among CERo and certain PIPE
Investors, pursuant to which CERo agreed to issue and sell 626 shares of Series B Preferred Stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Securities Act</i>&#8221;
refers to the Securities Act of 1933, as amended.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Securities Purchase
Agreements</i>&#8221; refers to the First Securities Purchase Agreement, the Second Securities Purchase Agreement and the Third Securities
Purchase Agreement.</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Series A Certificate
of Designations</i>&#8221; refers to the Certificate of Designations of Rights and Preferences of the Series A Preferred Stock, as amended
from time to time.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Series A Preferred
Stock</i>&#8221; refers to the Series A convertible preferred stock, $0.0001 par value per share, of CERo.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Series A Warrants</i>&#8221;
refers to warrants to purchase Common Stock, at a current exercise price of $1.39 per share, sold to certain PIPE Investors pursuant to
the First Securities Purchase Agreement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Series B Certificate
of Designations</i>&#8221; refers to the Certificate of Designations of Rights and Preferences of the Series B Preferred Stock, as amended
from time to time.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Series B Preferred
Stock</i>&#8221; refers to the Series B convertible preferred stock, $0.0001 par value per share, of CERo.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#8221;<i>Series C
Certificate of Designations</i>&#8221; refers to the Certificate of Designations of Rights and Preferences of the Series C Preferred Stock,
as amended from time to time.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Series C Preferred
Stock</i>&#8221; refers to the Series C convertible preferred stock, $0.0001 par value per share, of CERo.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Series C&#160;Warrants</i>&#8221;
refers to warrants to purchase shares of Common Stock, at a current exercise price of $0.098 per share, sold to certain PIPE Investors
pursuant to the Third Securities Purchase Agreement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Sponsor</i>&#8221;
refers to Phoenix Biotech Sponsor, LLC, a Delaware limited liability company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Tertiary Earnout
Shares</i>&#8221; refer to the 1,000,000 shares of Common Stock issued to the holders of Legacy CERo common stock and Legacy CERo preferred
stock in connection with the Business Combination, which will be fully vested upon the achievement of certain regulatory milestone-based
earnout targets.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Third PIPE Financing</i>&#8221;
refers to the private placement pursuant to which we issued and sold, and the PIPE Investors purchased, shares of Series C Preferred Stock,
on the terms and conditions set forth in the Third Securities Purchase Agreement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Third PIPE Registration
Rights Agreement</i>&#8221; refers to the Registration Rights Agreement, dated as of September 26, 2024, by and between CERo and certain
PIPE Investors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Third
Securities Purchase Agreement</i>&#8221; refers to the Securities Purchase Agreement, dated as of September 25, 2024, by and among
CERo and certain PIPE Investors, pursuant to which CERo agreed to issue and sell 2,853 shares of Series C Preferred Stock and
warrants to purchase 8,175,166 shares of Common Stock (the &#8220;Series C Warrants&#8221;).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Warrant Common
Shares</i>&#8221; refer to the shares of Common Stock underlying the Common Warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Warrant Preferred
Shares</i>&#8221; refer to the shares of Preferred Stock underlying the Preferred Warrants</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#8220;<i>Warrants</i>&#8221;
refer to the Rollover Warrants, the Private Placement Warrants, the Common Warrants, the Preferred Warrants and the Public Warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>


</div><!-- Field: Page; Sequence: 12; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_005"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">This prospectus contains
forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act. All
statements other than statements of historical facts contained in this prospectus, including statements regarding our future results of
operations and financial position, business strategy, drug candidates, planned preclinical studies and clinical trials, results of preclinical
studies, clinical trials, research and development (&#8220;R&amp;D&#8221;) costs, regulatory approvals, timing and likelihood of success,
as well as plans and objectives of management for future operations, are forward-looking statements. These statements involve known and
unknown risks, uncertainties and other important factors that are in some cases beyond our control and may cause our actual results, performance
or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking
statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In some cases, you can identify
forward-looking statements by terms such as &#8220;may,&#8221; &#8220;will,&#8221; &#8220;should,&#8221; &#8220;would,&#8221; &#8220;expect,&#8221;
&#8220;plan,&#8221; &#8220;anticipate,&#8221; &#8220;could,&#8221; &#8220;intend,&#8221; &#8220;target,&#8221; &#8220;project,&#8221;
&#8220;believe,&#8221; &#8220;estimate,&#8221; &#8220;predict,&#8221; &#8220;potential,&#8221; or &#8220;continue&#8221; or the negative
of these terms or other similar expressions. Forward-looking statements contained in this prospectus include, but are not limited to,
statements about:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;&#160;</p><div>

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</div><p style="margin: 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the ability to obtain or maintain the listing of our Common Stock, and our Public Warrants on the Nasdaq Stock Market LLC (&#8220;Nasdaq&#8221;) following the Business Combination;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the impact of macroeconomic conditions and geopolitical turmoil on our business and operations;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our expectations regarding the period during which we will qualify as an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (the &#8220;JOBS Act&#8221;) and as a smaller reporting company under the federal securities laws; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our anticipated use of our existing cash, cash equivalents and marketable securities.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We have based these forward-looking
statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends
that we believe may affect our business, financial condition, results of operations and prospects, and these forward-looking statements
are not guarantees of future performance or development. These forward-looking statements speak only as of the date of this prospectus
and are subject to a number of risks, uncertainties and assumptions described in &#8220;<i>Risk Factors</i>&#8221; and elsewhere in this
prospectus. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or
quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected
in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the
forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements
contained herein until after we distribute this prospectus, whether as a result of any new information, future events or otherwise.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, statements that
&#8220;we believe&#8221; and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon
information available to us as of the date of this prospectus, and while we believe such information forms a reasonable basis for such
statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an
exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and
you are cautioned not to unduly rely upon these statements.</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-variant: small-caps"><b>&#160;</b></span></p><div>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p>

<a id="a_006"></a><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PROSPECTUS SUMMARY</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><i>&#160;</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>The following summary
highlights information contained elsewhere in this prospectus. It does not contain all the information you should consider before investing
in our securities. You should read this entire prospectus carefully, including the sections titled &#8220;Risk Factors,&#8221; &#8220;Business,&#8221;
&#8220;Management&#8217;s Discussion and Analysis of Financial Condition and Results of Operations of CERo,&#8221; &#8220;Where You Can
Find More Information,&#8221; and our consolidated financial statements and related notes included elsewhere in this prospectus, before
making an investment decision. </i></p>

<p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0pt; margin-bottom: 0pt; text-indent: 0pt; text-align: justify"><b>Overview</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We are an innovative immunotherapy
company advancing the development of next-generation engineered T cell therapeutics for the treatment of cancer. Our proprietary approach
to T cell engineering, which enables us to integrate certain desirable characteristics of both innate and adaptive immunity into a single
therapeutic construct, is designed to engage the body&#8217;s full immune repertoire to achieve optimized cancer therapy. Our novel cellular
immunotherapy platform is designed to redirect patient-derived T cells to eliminate tumors by building in pathways that employ both cytotoxic
and phagocytic mechanisms to destroy cancer cells, creating what we refer to as Chimeric Engulfment Receptor T (&#8220;CER-T&#8221;) cells.
Our lead molecule is CER-1236, an autologous T-cell product that targets a novel tumor antigen, TIM-4 ligand. Unlike currently approved
chimeric antigen receptor (&#8220;CAR-T&#8221;) therapies which have largely been active in hematological B cell malignancies, we believe
CER-1236 will be efficacious in both hematological malignancies and solid tumors.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;<b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-right: 0pt; margin-bottom: 0pt; text-indent: 0pt; text-align: justify"><b>Recent Developments</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Keystone Equity Financing</i></b></p>

<p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i>&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In February 2024, we entered
into a common stock purchase agreement (the &#8220;Old Keystone Purchase Agreement&#8221;) with Keystone, pursuant to which we may sell
and issue, and Keystone is obligated to purchase, up to $25,000,000 of shares of Common Stock (the &#8220;Keystone Purchase Shares&#8221;);
provided that the number of shares issued pursuant to the Old Keystone Purchase Agreement shall not exceed 25,000,000 shares (the &#8220;Initial
Limit&#8221;). As consideration for Keystone&#8217;s commitment to purchase shares of Common Stock pursuant to the Keystone Purchase Agreements,
we issued an aggregate of 1,983,345 shares of Common Stock to Keystone (the &#8220;Keystone Commitment Shares&#8221;). As of the date
of this prospectus, we have issued and sold 23,377,921 shares of Common Stock for aggregate proceeds of $4,410,616 under the Keystone
Equity Financing. We previously filed a registration statement on Form S-1 (File No. 333-278603), which was declared effective by the
SEC on May 1, 2024, and remains in effect (the &#8220;Prior Registration Statement&#8221;), with respect to up to (i) 25,000,000 Keystone
Purchase Shares and (ii) 619,050 Keystone Commitment Shares. </p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In November 2024, in
order to enable us to issue and sell additional shares in excess of the Initial Limit and up to $25,000,000, we entered into the New
Keystone Purchase Agreement with Keystone, pursuant to which we may issue and sell up to $20,589,384 of shares of Common Stock.
Through December 16, 2024, we issued 1,800,000 shares of common stock for net proceeds of $186,300 pursuant to the New Keystone
Purchase Agreement.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We do not have a right to
commence any sales of Common Stock to Keystone under the New Keystone Purchase Agreement until the time when all of the conditions to
our right to commence sales of Common Stock to Keystone set forth in the New Keystone Purchase Agreement have been satisfied, including
the effectiveness of the registration statement of which this prospectus forms a part. We will control the timing and amount of any sales
of Common Stock to Keystone. Actual sales of shares of Common Stock to Keystone under the Keystone Purchase Agreements will depend on
a variety of factors to be determined by us from time to time, including, among others, market conditions, the trading price of the Common
Stock and determinations by us as to the appropriate sources of funding and our operations.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Concurrent with the execution
of the New Keystone Purchase Agreement, we entered into the New Keystone Registration Rights Agreement, pursuant to which we agreed to
provide Keystone with customary registration rights related to the shares issued under the New Keystone Purchase Agreement.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>
</div><div>

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</div><div style="padding-right: 6pt; padding-left: 6pt; border: Black 1.5pt solid; width: 98%">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Third PIPE Financing</i></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On September 25, 2024, we
consummated a private placement of 2,853 shares of Series C Preferred Stock and 8,175,166 Series C Warrants pursuant to the Third Securities
Purchase Agreement, by and among us and certain PIPE Investors for aggregate cash proceeds of approximately $1.25 million.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In connection with the Third
PIPE Financing, we entered into the Third PIPE Registration Rights Agreement with the PIPE Investors. The terms of the Third PIPE Registration
Rights Agreement require us to register the number of shares of Common Stock equal to the sum of (i) 250% of the maximum number of Common
Stock issuable upon conversion of the Series C Preferred Stock (assuming for purposes hereof that (x) the Series C Preferred Stock is
convertible at the Alternate Conversion Price (as defined in the Series C Certificate of Designations) assuming an Alternate Conversion
Date (as defined in the Series C Certificate of Designations) of such date of determination, and (y) any such conversion shall not take
into account any limitations on the conversion of the Series C Preferred Stock set forth in the Series C Certificate of Designations)
and (ii) the maximum number of Warrant Common Shares issuable upon exercise of the Warrants (without taking into account any limitations
on the exercise of the Warrants set forth therein).</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Investigational New Drug Application</i></b></p>

<p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On June 28, 2024, we submitted
an investigational new drug application (&#8220;IND&#8221;) for its product candidate, CER-1236, to the FDA. On July 26, 2024, we were
informed by the FDA that it has placed a clinical hold on the IND. The FDA indicated that the clinical hold has been placed as a result
of insufficient data provided with regard to two issues within pharmacology and toxicology of CER-1236. The FDA indicated that, within
30 calendar days, it would provide a detailed official hold letter and requested that the Company hold its response until after receipt
of such letter (the &#8220;Hold Letter&#8221;). The Company received the Hold Letter on July 26, 2024 and submitted a complete response
letter to the FDA on October 21, 2024 in which the Company requested a meeting to address the FDA&#8217;s questions. On November 15, 2024
the Company received notice from the FDA that the IND for CER-1236 was cleared. The Company continues to believe that we will be able
to initiate the planned clinical trial by early 2025.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><b><i>&#160;</i></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Nasdaq Letters</i></b></p>

<p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On July 19, 2024, we received
a letter (the &#8220;Bid Price Requirement Letter&#8221;) from the staff at Nasdaq notifying us that, for the 30 consecutive trading days
prior to the date of the Bid Price Requirement Letter, the closing bid price for CERo Common Stock has been below the minimum $1.00 per
share required for continued listing on Nasdaq set forth in Nasdaq Listing Rule 5450(a)(1), which is required for continued listing of
the Common Stock on Nasdaq (the &#8220;Bid Price Requirement&#8221;). On October 23, 2024, the trading price for CERo Common Stock closed
under $0.10 and was the tenth consecutive trading day to do so. On October 24, 2024, the Company received a letter from the staff at The
Nasdaq Global Market (&#8220;Nasdaq&#8221;) notifying the Company that, because its Common Stock had a closing bid price of $0.10 or less
for ten consecutive trading days, it was no longer eligible to rely upon the 180-day cure period set forth in the Bid Price Requirement
Letter. In addition, on October 30, 2024, the Company received a letter from the staff at Nasdaq notifying the Company that it had not
regained compliance with the continued listing requirement to maintain a minimum market value of $50,000,000 for its listed securities
within the 180-day compliance period granted by Nasdaq in May 2024.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On July 19, 2024, we also
received a letter (the &#8220;MVPHS Letter&#8221; and together with the Bid Price Requirement Letter, the &#8220;Nasdaq Letters&#8221;)
from Nasdaq notifying us that the &#8220;Market Value of Publicly Held Shares&#8221; (the &#8220;MVPHS&#8221;) of our Common Stock had
been below the minimum of $15,000,000 for the last 30 consecutive business days prior to the date of the MVPHS Letter, which is required
for continued listing of our Common Stock on Nasdaq pursuant to Nasdaq Listing Rule 5450(b)(2)(C) (the &#8220;MVPHS Requirement&#8221;).</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Such letters are in addition
to the letter from Nasdaq received by the Company on May 2, 2024 (the &#8220;MVLS Letter&#8221; and, together with the Bid Price Letter
and the MVPHS Letter, the &#8220;Letters&#8221;) notifying the Company that the &#8220;Market Value of Listed Securities&#8221; (&#8220;MVLS&#8221;)
of the Common Stock had traded below the minimum of $50,000,000 for the 30 consecutive trading days prior to the date of such MVLS Letter,
which is required for continued listing of the Common Stock on Nasdaq pursuant to Nasdaq Listing Rule 5450(b)(2)(A) (the &#8220;MVLS Requirement&#8221;
and, together with the Bid Price Requirement and the MVPHS Requirement, the &#8220;Requirements&#8221;).</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p>
</div><div>

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</div><div style="padding-right: 6pt; padding-left: 6pt; border: Black 1.5pt solid; width: 98%">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Each of the Bid Price Requirement
and MVLS Requirement deficiencies results in the commencement of delisting proceedings. However, the Company has requested a hearing from
Nasdaq and plans to submit a plan to regain compliance with the listing requirements at such hearing. Nasdaq has granted the requested
hearing and scheduled the hearing for December 17, 2024. Notwithstanding that applicable Nasdaq rules provide a 180-day compliance period
to regain compliance with the MVPHS Requirement, the plan submitted by the Company in connection with such hearing will be required to
demonstrate a pathway to compliance with all applicable deficiencies.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Company intends to evaluate
available options to resolve these deficiencies and regain compliance with the Requirements. Such options may include seeking to qualify
for continued listing under a different continued listing standard of the Nasdaq Global Market or Nasdaq Capital Market, in lieu of the
MVPHS and MVLS requirements, including the Equity Standard, if the Company has sufficient stockholders&#8217; equity at such time. While
the Company is exercising diligent efforts to maintain the listing of its securities on Nasdaq, there can be no assurance that the Company
will be able to regain or maintain compliance with Nasdaq listing standards.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On November 11, 2024, the
Company&#8217;s stockholders approved a reverse stock split ranging from 1:25 to 1:150. The stockholder approval of the reverse stock
split provides the Board of Directors with the authority to determine the exact ratio of the reverse stock split and implement such reverse
stock split within a year after the date of such approval. The Board of Directors expects to determine the ratio and implement the reverse
stock split prior to the Nasdaq hearing. Although such reverse stock split is expected to enable regaining compliance with the Bid Price
Requirement, it is not intended to contribute to regaining compliance with the other Requirements.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><b><i>&#160;</i></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Summary Risk Factors</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Investing in our securities
involves risks. If any of these risks actually occur, our business, financial condition and results of operations would likely be materially
adversely affected. You should carefully consider all the information contained in this prospectus before making a decision to invest
in our securities. In particular, you should consider the risk factors described under &#8220;<i>Risk Factors</i>&#8221; beginning on
page 9. Some of the principal risk factors are summarized below:</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the shares of Common Stock being offered in this prospectus represent a substantial percentage of the outstanding shares of Common Stock, and the sales of such shares, or the perception that these sales could occur, could cause the market price of the Common Stock to decline significantly.</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">sales of a substantial number of our securities in the public market by our existing securityholders could cause the price of our Common Stock and Warrants to fall.</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p>
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<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
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the public market and would result in dilution to our stockholders.</span></td>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p>

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issuance of shares of our Common Stock upon conversion or exercise of our outstanding Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series C Warrants and other securities that we may issue in future financing transactions may result in substantial
dilution to our stockholders.</span></td>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p>

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in this offering.</span></td>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0pt; margin: 0pt; text-align: justify"><b>Implications of Being an Emerging Growth Company
and a Smaller Reporting Company</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We are an &#8220;emerging
growth company&#8221; as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain
exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including,
but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced
disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements
of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously
approved.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Further, Section 102(b)(1)
of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until
private companies (that is, those that have not had a registration statement under the Securities Act declared effective or do not have
a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards.
The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply
to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition
period, which means that when a standard is issued or revised and it has different application dates for public or private companies,
we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparability of our financial statements with another public company which is neither an emerging growth company nor an
emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences
in accounting standards used.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We will remain an emerging
growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the effectiveness of the
registration statement filed in connection with the Initial Public Offering, (b) in which we have total annual gross revenue of at least
$1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common equity that
is held by non-affiliates exceeds $700 million as of the end of the prior fiscal year&#8217;s second fiscal quarter; and (2) the date
on which we have issued more than $1.00 billion in non-convertible debt securities during the prior three-year period. References herein
to &#8220;emerging growth company&#8221; have the meaning associated with it in the JOBS Act.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">As a result of this status,
we have taken advantage of reduced reporting requirements in this prospectus. In particular, in this prospectus, we have not included
all of the executive compensation-related information that would be required if we were not an emerging growth company.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Additionally, we are a &#8220;smaller
reporting company&#8221; as defined in Item 10(f)(1) of Regulation S-K, which allows us to take advantage of certain exemptions from disclosure
requirements including exemption from compliance with the auditor attestation requirements of Section 404. We will remain a smaller reporting
company until the last day of the fiscal year in which (i) the market value of the shares of our Common Stock held by non-affiliates exceeds
$250 million as of the prior June 30, and (ii) our annual revenue exceeded $100 million during such completed fiscal year or the market
value of the shares of our Common Stock held by non-affiliates exceeds $700 million as of the prior June 30. To the extent we take advantage
of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult
or impossible.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0pt; margin: 0pt; text-align: justify"><b>Additional Information</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We were incorporated under
the laws of the State of Delaware on June 8, 2021 under the name &#8220;Phoenix Biotech Acquisition Corp.&#8221; for the purpose of effecting
a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.
Legacy CERo was founded in 2016. In connection with the Business Combination, we changed our name to &#8220;CERo Therapeutics Holdings,
Inc.&#8221;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The mailing address of our
principal executive office is 201 Haskins Way, Suite 230, South San Francisco, CA 94080, and the telephone number is (650) 407-2736. Our
website is <i>www.cero.bio</i>. Information contained on or accessible through our website is not a part of or incorporated by reference
into this prospectus and the inclusion of our website address in this prospectus is an inactive textual reference only.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p>
</div><div>

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</div><div style="padding-right: 6pt; padding-left: 6pt; border: Black 1.5pt solid; width: 98%">
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

<a id="a_007"></a><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>THE OFFERING</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-variant: small-caps"><b>&#160;</b></span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="text-indent: -0.125in; padding-left: 0.125in; width: 24%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Issuer</span></td>
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    <td style="text-align: justify; width: 75%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">CERo Therapeutics Holdings, Inc., a Delaware corporation.</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Shares of Common Stock offered by us</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Up to [____] shares of our Common Stock, consisting of: </span></td></tr>
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    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td>
    <td>&#160;</td>
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    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Pre-funded warrants offered by us&#160;</span></td>
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    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
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    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;Common warrants to be Offered</span></td>
    <td>&#160;</td>
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  <tr style="vertical-align: top">
    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td>
    <td>&#160;</td>
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  <tr style="vertical-align: top">
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    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td>
    <td>&#160;</td>
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  <tr style="vertical-align: top">
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    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">[____] shares, assuming no sale of Pre-Funded Warrants, which, if sold, would reduce the number of shares of Common Stock that we are offering on a one-for-one basis, and further assuming no exercise of any Offered Common Warrants.</span></td></tr>
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    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td>
    <td>&#160;</td>
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">This offering will terminate on [____], 2024, unless we decide to terminate the offering (which we may do at any time in our discretion) prior to that date.</span></td></tr>
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    <td style="text-indent: -0.125in; padding-left: 0.125in">&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-indent: -0.125in; padding-left: 0.125in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Use of proceeds</span></td>
    <td>&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We intend to use the net proceeds from this offering, together with our existing cash, to advance our clinical programs, for working capital and other general corporate purposes. See &#8220;<i>Use of Proceeds</i>&#8221; for additional information.</span></td></tr>
</table>

<p style="margin: 0">&#160;</p>
</div><div>

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</div><div style="padding-right: 6pt; padding-left: 6pt; border: Black 1.5pt solid; width: 98%">
<p style="margin: 0">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="width: 1%">&#160;</td>
    <td style="width: 75%">
    <p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0pt; margin: 0pt; text-align: justify">Our Common Stock is listed on the Nasdaq&#160;Global
    Market under the symbol &#8220;CERO&#8221;.&#160;There is no established trading market for the Pre-Funded Warrants and Offered Common
    Warrants, and we do not expect a trading market to develop.</p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>
    <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-indent: 0pt; text-align: justify">We do not intend to list the Offered Common Warrants
    or the Pre-Funded Warrants on any securities exchange or other trading market. Without a trading market, the liquidity of the Offered
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  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td></tr>
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    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Risk factors</span></td>
    <td style="text-align: justify">&#160;</td>
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Stock that will be outstanding after this offering is based on 191,881,107 shares of Common Stock outstanding as of December 16, 2024,
and excludes:</p>
<p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0.25in; margin: 0pt 0; text-align: justify">

</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">6,107,373 shares of Common Stock underlying outstanding options;</td>
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<p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
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                                                                                       includes 21,910,608 shares of Common Stock reserved for issuance under our 2016 Plan and our 2024 Plan;</td>
</tr></table>

<p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">572,182 shares of Common Stock issuable under our 2024 ESPP, which includes 572,182 shares of Common
                                                                                       Stock reserved for issuance under our 2024 ESPP;</td>
</tr></table>

<p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
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                                                                                       Placement Warrants;</td>
</tr></table>

<p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
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                                                                                       offerings of our Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock;</td>
</tr></table>

<p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">117,286,607 shares of Common Stock issuable upon conversion of the Series A Preferred Stock,
                                                                                       Series B Preferred Stock, and Series C Preferred Stock, including 39,075,000 shares issuable upon the exercise of Preferred
                                                                                       Warrants;</td>
</tr></table>

<p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">[___] shares of Common Stock issuable upon the exercise of
Offered Common Warrants issued in this offering described in this prospectus; and</td>
</tr></table>

<p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">[___] shares of Common Stock issuable upon the exercise of
Pre-Funded Warrants, if issued in this offering described in this prospectus.</td>
</tr></table>

<p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>
</div><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_008"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>RISK FACTORS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Investing in our securities
involves a high degree of risk. Before you decide to invest in our securities, you should consider carefully the risks described below,
together with the other information contained in this prospectus, including our financial statements and the related notes appearing at
the end of this prospectus. We believe the risks described below are the risks that are material to us as of the date of this prospectus.
If any of the following risks actually occur, our business, results of operations and financial condition would likely be materially and
adversely affected. In these circumstances, the market price of our securities could decline, and you may lose part or all of your investment</i>.</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0.25in; margin: 0pt 0 0pt -0.25in; text-align: justify"><b>Risks Related to this Offering</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>There is no public market for Offered Common
Warrants or the Pre-Funded Warrants to purchase shares of our Common Stock being offered by us in this offering.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">There is no established public
trading market for the Offered Common Warrants or the Pre-Funded Warrants to purchase shares of our Common Stock that are being offered
as part of this offering, and we do not expect a market to develop. In addition, we do not intend to apply to list the Offered Common
Warrants or the Pre-Funded Warrants on any national securities exchange or other nationally recognized trading system, including the Nasdaq
Global Market. Without an active market, the liquidity of the Offered Common Warrants and the Pre-Funded Warrants will be limited.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0.25in; margin: 0pt 0; text-align: justify">

</p><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>The Offered Common Warrants and the Pre-Funded
Warrants are speculative in nature.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Offered Common Warrants and the Pre-Funded
Warrants do not confer any rights of Common Stock ownership on their holders, such as voting rights or the right to receive dividends,
but rather merely represent the right to acquire shares of Common Stock at a fixed price. Specifically, commencing on the date of issuance,
holders of the Offered Common Warrants may exercise their right to acquire Common Stock and pay an exercise price of $[__] per share,
subject to certain adjustments, prior to five years from the date on which such Offered Common Warrants were issued, after which date
any unexercised Offered Common Warrants will expire and have no further value. Holders of Pre-Funded Warrants have identical rights, except
that the Pre-Funded Warrants have an exercise price of $0.001 and do not expire until exercised in full. Moreover, following this offering,
the market value of the Offered Common Warrants and Pre-Funded Warrants, if any, is uncertain and there can be no assurance that the market
value of the Offered Common Warrants or the Pre-Funded Warrants will equal or exceed their imputed offering price.</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Holders of the Offered Common Warrants and
Pre-Funded Warrants offered hereby will have no rights as common stockholders with respect to the shares our common stock underlying the
Offered Common Warrants and Pre-Funded Warrants until such holders exercise their Offered Common Warrants and Pre-Funded Warrants and
acquire our common stock, except as otherwise provided in the Offered Common Warrants and Pre-Funded Warrants.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Until holders of the Offered Common Warrants
and Pre-Funded Warrants acquire shares of our Common Stock upon exercise thereof, such holders will have no rights with respect to
the shares of our Common Stock underlying such warrants. Upon exercise of the Offered Common Warrants and Pre-Funded Warrants, the
holders will be entitled to exercise the rights of a common stockholder only as to matters for which the record date occurs after
the exercise date. This is a best efforts offering, no minimum amount of securities is required to be sold, and we may not raise the
amount of capital we believe is required for our business plan.</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The placement agent has agreed to use its reasonable
best efforts to solicit offers to purchase the securities in this offering. The placement agent has no obligation to buy any of the securities
from us or to arrange for the purchase or sale of any specific number or dollar amount of the securities. There is no required minimum
number of securities that must be sold as a condition to completion of this offering. Because there is no minimum offering amount required
as a condition to the closing of this offering, the actual offering amount, placement agent fees and proceeds to us are not presently
determinable and may be substantially less than the maximum amounts contemplated in this prospectus. We may sell fewer than all of the
securities offered hereby, which may significantly reduce the amount of proceeds received by us, and investors in this offering will not
receive a refund in the event that we do not sell an amount of securities sufficient to support our continued operations, including our
near-term continued operations.</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0.25in; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Our management has broad discretion as to
the use of the net proceeds from this offering.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our management will have broad discretion in the
application of the net proceeds from this offering, including for any of the purposes described in the section titled &#8220;Use of Proceeds.&#8221;
Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use
may vary substantially from their currently intended use. Our management might not apply our net proceeds in ways that ultimately increase
the value of your investment, and the failure by our management to apply these funds effectively could harm our business. If we do not
invest or apply the net proceeds from this offering in ways that enhance stockholder value, we may fail to achieve expected results, which
could cause our Common Stock price to decline.</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>If you purchase securities in this offering,
you will experience immediate and substantial dilution and may experience additional dilution in the future.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Investors purchasing shares of our Common Stock,
or Pre-Funded Warrants in lieu thereof, and accompanying Offered Common Warrants in this offering will pay a price per share that substantially
exceeds the as adjusted net tangible book value per share. As a result, investors purchasing our Common Stock and accompanying Offered
Common Warrants in this offering will incur immediate dilution of $[__] per share, representing the difference between the assumed public
offering price of $[__] per share, which is the last reported sale price of our Common Stock on the Nasdaq Global Market on	 [__],
2024, and our as adjusted net tangible book value as of September 30, 2024. For more information on the dilution you may suffer as a result
of investing in this offering, see &#8220;Dilution.&#8221;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Because there is no minimum required for
the offering to close, investors in this offering will not receive a refund in the event that we do not sell an amount of securities sufficient
to pursue the business goals outlined in this prospectus.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have not specified a minimum offering amount
nor have or will we establish an escrow account in connection with this offering. Because there is no escrow account and no minimum offering
amount, investors could be in a position where they have invested in our company, but we are unable to fulfill our objectives due to a
lack of interest in this offering. Further, because there is no escrow account in operation and no minimum investment amount, any proceeds
from the sale of securities offered by us will be available for our immediate use, despite uncertainty about whether we would be able
to use such funds to effectively implement our business plan. Investor funds will not be returned under any circumstances whether during
or after the offering.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b>&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0pt; margin: 0pt; text-align: justify"><b>Risks Related to our Business and Industry</b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>We have incurred significant losses in every
year since our inception. We expect to continue to incur losses over the next several&#160;years and may never achieve or maintain profitability.
</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We are a preclinical
stage biopharmaceutical company with a limited operating history, and we have incurred significant net losses since our inception in
2016. We incurred net losses of approximately $7.3 million and $11.8 million for the&#160;years ended December 31, 2023 and 2022,
respectively. Additionally, we incurred a net loss of approximately $8.4 million for the nine month period ended September 30, 2024.
As of September 30, 2024, we had an accumulated deficit of $71.6&#160;million. We have funded our operations to date primarily with
proceeds from the sale of our equity securities in private financing transactions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We have no products approved
for commercial sale and we are devoting, and expect to continue devoting, substantially all of our financial resources and efforts to
R&amp;D of our only programmed CER-T cell product candidate, CER-1236, as well as to building out our manufacturing infrastructure, CDMO
relationships and CER-T cell programming technologies. Investment in biopharmaceutical product development, especially preclinical products,
is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential product candidate
will not successfully undergo or complete necessary clinical trials, fail to demonstrate adequate effect or an acceptable safety profile,
gain regulatory approval and become commercially viable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

</div><!-- Field: Page; Sequence: 24; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->10<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We expect that it could take
several&#160;years until any of our product candidates, which at present is solely CER-1236, receive regulatory and marketing approval
and are commercialized, and we may never be successful in obtaining regulatory and marketing approval and commercializing product candidates.
We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. These net losses will
adversely impact our stockholders&#8217; equity and net assets and may fluctuate significantly from quarter to quarter and year to year.
We anticipate that our expenses will increase substantially as we:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">To become and remain profitable,
we must succeed in developing and eventually commercializing products that generate significant revenue. This will require us to be successful
in a range of challenging activities, including completing preclinical studies and clinical trials for our product candidates, preparing
a satisfactory filing package for regulatory authorities, obtaining regulatory approval, manufacturing, marketing and selling any products
for which we may obtain regulatory approval, as well as discovering and developing additional product candidates. We may never succeed
in these activities and, even if we do, may never generate revenues that are significant enough to achieve profitability.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Because of the numerous risks
and uncertainties associated with the development, manufacturing, delivery and commercialization of complex autologous cell therapies,
we are unable to accurately predict the timing or amount of expenses or when, or if, we will be able to achieve profitability. If we are
required by regulatory authorities to perform studies in addition to those currently expected, or if there are any delays in the initiation
and completion of our clinical trials or the development of any of our product candidates, our expenses could increase and profitability
could be further delayed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Even if we achieve profitability,
we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would
depress the value of our securities and could impair our ability to raise capital, expand our business, maintain our R&amp;D efforts or
continue our operations. A decline in the value of our securities could also cause you to lose all or part of your investment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

</div><!-- Field: Page; Sequence: 25; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->11<!-- Field: /Sequence --></span></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Our independent registered public accountants
have expressed substantial doubt as to our ability to continue as a going concern.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In its report on our financial
statements for the year ended December 31, 2023, our independent registered public accounting firm included an explanatory paragraph that
expressed substantial doubt about our ability to continue as a going concern. Our current cash level raises substantial doubt about our
ability to continue as a going concern. In addition, our future financial statements may include similar qualifications about our ability
to continue as a going concern. Our financial statements were prepared assuming that we will continue as a going concern and do not include
any adjustments that may result from the outcome of this uncertainty. If we are unable to meet our current operating costs, we will need
to seek additional financing or modify or cease our operational plans. If we seek additional financing to fund our business activities
in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources
may be unwilling to provide additional funding to us on commercially reasonable terms or at all.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Our limited operating history makes it difficult
to evaluate our business and assess our future viability and prospects.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We are a preclinical stage
company with a limited operating history. We commenced operations in 2016, and our operations to date have been limited to organizing
and planning our development efforts, raising capital, conducting discovery and research activities, filing patent applications, identifying
potential product candidates, undertaking preclinical studies, and establishing arrangements with third parties for the manufacture of
initial quantities of CER-1236 and component materials. We have not yet demonstrated our ability to successfully complete any clinical
trials, obtain regulatory approvals, manufacture a commercial-scale product or arrange for a third party to do so on our behalf, or conduct
sales, marketing and distribution activities necessary for successful product commercialization. Consequently, any predictions you make
about our future success or viability may not be as accurate as they could be if we had a longer operating history.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, as a young business,
we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will need to transition
at some point from a company with a R&amp;D focus to a company capable of supporting commercial activities. We may not be successful in
such a transition.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We expect our financial condition
and operating results to continue to fluctuate significantly from quarter to quarter and year to year due to a variety of factors, many
of which are beyond our control. Accordingly, you should not rely upon the results of any quarterly or annual periods as indications of
future operating performance.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Our business is highly dependent on the
success of our lead product candidate. If we are unable to advance clinical development, obtain approval of and successfully commercialize
our lead product candidate for the treatment of patients in approved indications, our business would be significantly harmed.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our business and future success
depends on our ability to advance clinical development, obtain regulatory approval of, and then successfully commercialize, CER-1236,
our lead product candidate. Because our CER-1236 product candidate will be among the first autologous T cell product candidates engineered
with cytotoxic and phagocytic potency to be evaluated in clinical trials, the failure of such product candidate, or the failure of other
autologous T cell therapies, including for reasons due to safety, efficacy or durability, may impede our ability to develop our product
candidates, and significantly influence physicians&#8217; and regulators&#8217; opinions with regard to the viability of our entire pipeline
of autologous T cell therapies.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">All of our product candidates,
including our lead product candidate, will require additional preclinical, clinical and non-clinical development, regulatory review and
approval in multiple jurisdictions, substantial investment, access to sufficient commercial manufacturing capacity and significant marketing
efforts before we can generate any revenue from product sales. In addition, because our other product candidates are based on similar
technology as our lead product candidate, if the lead product candidate encounters additional safety issues, efficacy problems, manufacturing
problems, developmental delays, regulatory issues or other problems, our development plans and business would be significantly harmed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 26; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->12<!-- Field: /Sequence --></span></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>We have not generated any revenue and may
never be profitable.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our ability to become profitable
depends upon our ability to generate revenue. To date, we have not generated any revenue. We do not expect to generate significant revenue
unless or until we successfully complete clinical development and obtain regulatory approval of, and then successfully commercialize,
our product candidates. We do not know when, or if, we will generate any revenue. All of our product candidates, including CER-1236, are
in the preclinical stages of development and will require additional preclinical studies, clinical development regulatory review and approval,
substantial investment, access to sufficient commercial manufacturing capacity and significant marketing efforts before we can generate
any revenue from product sales. Our ability to generate revenue depends on a number of factors, including, but not limited to, our ability
to:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Many of the factors listed
above are beyond our control and could cause us to experience significant delays or prevent us from obtaining regulatory approvals or
commercialize our product candidates. Even if we are able to commercialize our product candidates, we may not achieve profitability soon
after generating product sales, if ever. If we are unable to generate sufficient revenue through the sale of our product candidates or
any future product candidates, we may be unable to continue operations without continued funding.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

</div><!-- Field: Page; Sequence: 27; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->13<!-- Field: /Sequence --></span></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Our engineered CER-T cells represent a novel
approach to cancer treatment that creates significant challenges for us.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We are developing autologous
T-cell product candidates that are engineered from healthy donor T-cells to express chimeric engulfment receptors (&#8220;CERs&#8221;)
and are intended for use in patients with certain cancers. Advancing these novel product candidates creates significant challenges for
us, including:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Our preclinical programs may experience
delays or may never advance to clinical trials, which would adversely affect our ability to obtain regulatory approvals or to commercialize
these programs on a timely basis or at all, which would have an adverse effect on our business.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our product candidates, including
CER-1236, are in the preclinical development stage. The risk of failure of preclinical programs is high. Before we can commence clinical
trials for a product candidate, we are nearing completion of extensive preclinical testing and studies to obtain regulatory clearance
to initiate human clinical trials with CER-1236, and have engaged in a pre-IND meeting with the FDA.&#160;We expect that our clinical
trials will be conducted on populations based in the United&#160;States and Europe. We cannot be certain of the timely completion or outcome
of our preclinical testing and studies and cannot predict if the FDA, the EMA or other regulatory authorities will accept our proposed
clinical programs or if the outcome of our preclinical testing and studies will ultimately support the further development of our programs.
As a result, we cannot be sure that we will be able to submit INDs or similar applications for our clinical programs on the timelines
we expect, if at all.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Success in preclinical studies or clinical
trials may not be indicative of results in future clinical trials.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Results from preclinical
studies are not necessarily predictive of future clinical trial results, and interim results of a clinical trial are not necessarily indicative
of final results. Our product candidates may ultimately fail to show the desired safety and efficacy in clinical settings despite positive
results in preclinical studies or having successfully advanced through initial clinical trials. This failure to establish sufficient efficacy
and safety could cause us to abandon clinical development of our product candidates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Manufacturing genetically engineered products
is complex and we, or our third-party manufacturers, may encounter difficulties in production. If we or any of our third-party manufacturers
encounter such difficulties, our ability to provide supply of our product candidates for clinical trials or our products for patients,
if approved, could be delayed or prevented.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Manufacturing genetically
engineered products is complex and may require the use of innovative technologies to handle living cells. Manufacturing these products
requires facilities specifically designed for and validated for this purpose and sophisticated quality assurance and quality control procedures
are necessary. Slight deviations anywhere in the manufacturing process, including filling, labeling, packaging, storage and shipping and
quality control and testing, may result in failures, product recalls or spoilage. When changes are made to the manufacturing process,
we may be required to provide preclinical and clinical data showing the comparable identity, strength, quality, purity or potency of the
products before and after such changes. If microbial, viral or other contaminations are discovered at manufacturing facilities, such facilities
may need to be closed for an extended period of time to investigate and remedy the contamination, which could delay clinical trials and
adversely harm our business. The use of biologically derived ingredients can also lead to allegations of harm, including infections or
allergic reactions, or closure of product facilities due to possible contamination.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, there are risks
associated with large scale manufacturing for clinical trials or commercial scale including, among others, cost overruns, potential problems
with process scale-up, process reproducibility, stability issues, compliance with good manufacturing practices, lot consistency and timely
availability of raw materials. Even if we obtain marketing approval for any of our product candidates, there is no assurance that we or
our manufacturers will be able to manufacture the approved product to specifications acceptable to the FDA, the EMA or other comparable
foreign regulatory authorities, to produce it in sufficient quantities to meet the requirements for the potential commercial launch of
the product or to meet potential future demand. If we or our manufacturers are unable to produce sufficient quantities for clinical trials
or for commercialization, our development and commercialization efforts would be impaired, which would have an adverse effect on our business,
financial condition, results of operations and growth prospects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Genetic engineering of T cells to create
CER-T cells is a relatively new technology, and if we are unable to use this technology in our intended product candidates, our revenue
opportunities will be materially limited.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our technology involves a
relatively new approach to T cell gene therapy. This technology may also not be shown to be effective in clinical studies that we may
conduct, or may be associated with safety issues that may negatively affect the development of our product candidates. For instance, lentiviral
gene transduction may create unintended changes to the DNA such as a non-target site gene insertion, a large deletion, or a DNA translocation,
any of which could lead to oncogenesis.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>We may not be successful in our efforts
to identify or discover additional product candidates.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The success of our business
depends primarily upon our ability to identify, develop and commercialize products based on our CER-T cell technology. Our research programs
may fail to identify other potential product candidates outside of CER-1236 for clinical development for a number of reasons. We may be
unsuccessful in identifying potential product candidates or our potential product candidates may be shown to have harmful side effects
or may have other characteristics that may make the products unmarketable or unlikely to receive marketing approval. Research programs
to identify new product candidates require substantial technical, financial and human resources. We may focus our efforts and resources
on potential programs or product candidates that ultimately prove to be unsuccessful. If any of these events occur, we may be forced to
abandon our research, development or commercialization efforts for a program or programs, which would have a material adverse effect on
our business and could potentially cause us to cease operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

</div><!-- Field: Page; Sequence: 29; Value: 1 --><div>
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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Even if we obtain regulatory approval of
a product candidate, the product may not gain market acceptance among physicians, patients, hospitals, cancer treatment centers and others
in the medical community.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The use of engineered T cells
as a potential cancer treatment is nascent and may not become broadly accepted by physicians, patients, hospitals, cancer treatment centers
and others in the medical community. We expect physicians with expertise in immunotherapy to be particularly important to the market acceptance
of our products and we may not be able to educate them on the benefits of using our product candidates for many reasons. For example,
certain of the product candidates that we will be developing may result in unacceptable and unanticipated side effects, including death.
Additional factors will influence whether our product candidates are accepted in the market, including:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the willingness of patients to pay out-of-pocket in the absence of coverage and adequate reimbursement by third-party payors and government authorities;</span></td></tr>
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</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">relative convenience and ease of administration, including as compared to alternative treatments and competitive therapies; and</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the effectiveness of our sales and marketing efforts.</span></td></tr>
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</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If our product candidates
are approved but fail to achieve market acceptance among physicians, patients, hospitals, cancer treatment centers or others in the medical
community, we will not be able to generate significant revenue. Even if our products achieve market acceptance, we may not be able to
maintain that market acceptance over time if new products or technologies are introduced that are more favorably received than our products,
are more cost effective or render our products obsolete.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Data from our preclinical studies is limited
and may change as patient data become available or may not be validated in any future or advanced clinical trial.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Data from preclinical studies
and any clinical trials that we may complete is subject to the risk that one or more of the clinical outcomes may materially change as
patient enrollment continues and more patient data becomes available. For example, preclinical and Phase&#160;1 results are preliminary
in nature and should not be viewed as predictive of ultimate success. It is possible that such results will not continue or may not be
repeated in any clinical trial of our product candidates. For instance, our preclinical studies provide limited data and any clinical
trials may not validate such results. Additionally, manufacturing can impact clinical outcomes and we have not yet completed manufacturing
runs with a CDMO.&#160;We may also fail to develop and transfer to a CDMO any optimized manufacturing processes for any of our programs.
Ultimately, if we cannot manufacture our product candidates with consistent and reproducible product characteristics, our ability to develop
and commercialize any product candidate would be significantly impacted.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Preliminary data also remains
subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we
previously published. As a result, initial, interim and preliminary data should be viewed with caution until the final data are available.
Adverse differences between preliminary or interim data and final data could significantly harm our business prospects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

</div><!-- Field: Page; Sequence: 30; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->16<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>We may not be able to file INDs or IND amendments
to commence clinical trials on the timelines we expect, and even if we are able to, the FDA may not permit us to proceed.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The IND for CER-1236 was
filed on June 28, 2024 and on November 15, 2024, the FDA cleared us to begin clinical trials, but there are no assurances regarding the
acceptance of any amendments or future INDs, which may impact the timelines we expect. For example, we may experience manufacturing delays
or other delays with future IND-enabling studies. Moreover, there can be no assurances that once trials begin, issues will not arise that
suspend or terminate such clinical trials. Additionally, even if such regulatory authorities agree with the design and implementation
of the clinical trials set forth in an IND, we cannot guarantee that such regulatory authorities will not change their requirements in
the future. These considerations also apply to new clinical trials we may submit as amendments to existing INDs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Clinical trials are difficult to design
and implement, involve uncertain outcomes and may not be successful.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Human clinical trials are
difficult to design and implement, in part because they are subject to rigorous regulatory requirements. The design of a clinical trial
can determine whether its results will support approval of a product, and flaws in the design of a clinical trial may not become apparent
until the clinical trial is well advanced. We may be unable to design and execute a clinical trial that will be successful to achieve
regulatory approval. There is a high failure rate for biological products proceeding through clinical trials, which may be higher for
our product candidates because they are based on new technology and engineered on a patient-by-patient basis. Many companies in the pharmaceutical
and biotechnology industries have suffered significant setbacks in late-stage clinical trials even after achieving promising results in
preclinical testing and earlier-stage clinical trials. Data obtained from preclinical and clinical activities are subject to varying interpretations,
which may delay, limit or prevent regulatory approval. In addition, we may experience regulatory delays or rejections as a result of many
factors, including changes in regulatory policy during the period of our product candidate development. Any such delays could negatively
impact our business, financial condition, results of operations and prospects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>We will depend on enrollment of patients
in our clinical trials for our product candidates. If we encounter difficulties enrolling patients in our clinical trials, our clinical
development activities could be delayed or otherwise adversely affected.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Identifying and qualifying
patients to participate in clinical trials of our product candidates will be critical to our success. We may experience difficulties in
patient enrollment in our clinical trials for a variety of reasons. The timely completion of clinical trials in accordance with their
protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the study until its conclusion.
The enrollment of patients depends on many factors, including:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="margin: 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our ability to recruit clinical trial investigators with the appropriate competencies and experience;</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt"></p><div>

</div><!-- Field: Page; Sequence: 31; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">competing clinical trials for similar therapies or other new therapeutics not involving T cell-based immunotherapy;</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the risk that patients enrolled in clinical trials will drop out of the clinical trials before completion of their treatment; and</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In particular, some of our
clinical trials will look to enroll patients with characteristics which are found in a very small population. For example, our clinical
trial for CER-1236 will seek to enroll patients with hematologic malignancies, including AML, MCL, CLL, and other B&#160;cell and myeloid
neoplasms. Other companies are conducting clinical trials with their engineered T cell therapies in hematologic malignancies and seek
to enroll patients in their studies that may otherwise be eligible for our clinical trials, which could lead to slow recruitment and delays
in our clinical trials. In addition, since the number of qualified clinical investigators is limited, we expect to conduct some of our
clinical trials at the same clinical trial sites that some of our competitors use, which could further reduce the number of patients who
are available for our clinical trials in these clinical trial sites.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Moreover, because our product
candidates represent a departure from more commonly used methods for cancer treatment, potential study participants and their doctors
may be inclined to use conventional therapies, such as chemotherapy and antibody therapy, rather than participate in our clinical trials.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Delays in patient enrollment
may result in increased costs or may affect the timing or outcome of the planned clinical trials, which could prevent completion of these
clinical trials and adversely affect our ability to advance the development of our product candidates. In addition, many of the factors
that may lead to a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval
of our product candidates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>If the market opportunities for any of our
product candidates are smaller than we believe they are, our revenue may be adversely affected, and our business may suffer.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We are focused initially
on the development of treatments for cancers such as AML, MCL and CLL, and plan to eventually extend our treatments to other forms of
cancer. Our internal projections of addressable patient populations that have the potential to benefit from treatment with our product
candidates are based on estimates. If any of our estimates are inaccurate, the market opportunities for any of our product candidates
could be significantly diminished and have an adverse material impact on our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>We currently have no marketing and sales
organization and have no experience in marketing products. If we are unable to establish marketing and sales capabilities or enter into
agreements with third parties to market and sell our product candidates, if licensed, we may not be able to generate product revenue.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We currently have no sales,
marketing or distribution capabilities and have no experience in marketing products. We intend to develop an in-house marketing organization
and sales force, which will require significant capital expenditures, management resources and time. We will have to compete with other
pharmaceutical and biotechnology companies to recruit, hire, train and retain marketing and sales personnel.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If we are unable or decide
not to establish internal sales, marketing and distribution capabilities, we will pursue collaborative arrangements regarding the sales
and marketing of our product candidates following their approval. However, there can be no assurance that we will be able to establish
or maintain such collaborative arrangements, or if we are able to do so, that they will have effective sales forces. Any revenue we receive
will depend upon the efforts of such third parties, which may not be successful. We may have little or no control over the marketing and
sales efforts of such third parties and our revenue from product sales may be lower than if we had commercialized our product candidates
ourselves. We also face competition in our search for third parties to assist us with the sales and marketing efforts of our product candidates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

</div><!-- Field: Page; Sequence: 32; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->18<!-- Field: /Sequence --></span></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">There can be no assurance
that we will be able to develop in-house sales and distribution capabilities or establish or maintain relationships with third-party collaborators
to commercialize any product in the United&#160;States or overseas.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>We face competition from companies that
have developed or may develop product candidates for the treatment of the diseases that we may target, including companies developing
novel therapies and platform technologies. If these companies develop platform technologies or product candidates more rapidly than we
do, if their platform technologies or product candidates are more effective or have fewer side effects, our ability to develop and successfully
commercialize product candidates may be adversely affected.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The development and commercialization
of cell and gene therapies Is highly competitive. We compete with a variety of large pharmaceutical companies, multinational biopharmaceutical
companies, other biopharmaceutical companies and specialized biotechnology companies, as well as technology and/or therapeutics being
developed at universities and other research institutions. Our competitors are often larger and better funded than we are. Our competitors
have developed, are developing or will develop product candidates and processes competitive with ours. Competitive therapeutic treatments
include those that have already been approved and accepted by the medical community and any new treatments that are currently in development
or that enter the market. We believe that a significant number of product candidates are currently under development, and may become commercially
available in the future, for the treatment of conditions for which we may try to develop product candidates. There is intense and rapidly
evolving competition in the biotechnology and biopharmaceutical fields. We believe that while our T-cell based platform, its associated
intellectual property portfolio, the characteristics of our current and potential future product candidates and our scientific and technical
know-how together give us a competitive advantage in this space, competition from many sources remains.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Many of our competitors have
significantly greater financial, technical, manufacturing, marketing, sales and supply resources or experience than we do. If we successfully
obtain approval for any product candidate, we will face competition based on many different factors, including the safety and effectiveness
of our product candidates, the ease with which our product candidates can be administered, the timing and scope of regulatory approvals
for these product candidates, the availability and cost of manufacturing, marketing and sales capabilities, price, reimbursement coverage
and patent position. Competing products and product candidates could present superior treatment alternatives, including by being more
effective, safer, less expensive or marketed and sold more effectively than any products we may develop. Competitive products and product
candidates may make any product we develop obsolete or noncompetitive before we recover the expense of developing and commercializing
such product. Such competitors could also recruit our employees, which could negatively impact our level of expertise and our ability
to execute our business plan.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">These competitors also compete
with us in recruiting and retaining qualified scientific and management personnel and establishing clinical study sites and patient registration
for clinical studies, as well as in acquiring technologies complementary to, or necessary for, our programs. Smaller or early-stage companies
may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our commercial opportunity
could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less
severe side effects, are more convenient or are less expensive or better reimbursed than any products that we may commercialize. Our competitors
also may obtain FDA, EMA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could
result in our competitors establishing a strong market position for either the product or a specific indication before we are able to
enter the market.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>We are highly dependent on our key personnel,
including individuals with expertise in cell therapy development and manufacturing, and if we are not successful in attracting and retaining
highly qualified personnel, we may not be able to successfully implement our business strategy.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our ability to compete in
the highly competitive biotechnology and pharmaceutical industries depends upon our ability to attract and retain highly qualified managerial,
scientific and medical personnel. We are highly dependent on the expertise of our management, scientific and medical personnel, including
our chief executive officer (&#8220;Chief Executive Officer&#8221;), Chris Ehrlich, our chief development officer (&#8220;Chief Development
Officer&#8221;), Kristen Pierce, our chief financial officer (&#8220;Chief Financial Officer&#8221;), Al Kucharchuk and the head of our
scientific advisory board (the &#8220;Scientific Advisory Board&#8221;), Lawrence Corey. The loss of the services of any of our executive
officers, other key employees, and other scientific and medical advisors, and our inability to find suitable replacements could result
in delays in product development and harm our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

</div><!-- Field: Page; Sequence: 33; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->19<!-- Field: /Sequence --></span></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We conduct substantially
all of our operations at our facilities in the South San Francisco area. The San Francisco Bay Area region is headquarters to many other
biopharmaceutical companies and many academic and research institutions. Competition for skilled personnel in our market is intense and
may limit our ability to hire and retain highly qualified personnel on acceptable terms or at all. Attrition may lead to higher costs
for hiring and retention, diversion of management time to address retention matters and disrupt the business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">To induce valuable employees
to remain at our company, in addition to salary and cash incentives, we have provided equity-based compensation for retention purposes.
Despite our efforts to retain valuable employees, members of our management, scientific and development teams may terminate their employment
with us on short notice. Although we have employment agreements with our key employees, these employment agreements provide for at-will
employment, which means that any of our employees could leave our employment at any time, with or without notice. We do not maintain &#8220;key
person&#8221; insurance policies on the lives of these individuals or the lives of any of our other employees. Our success also depends
on our ability to continue to attract, retain and motivate highly skilled junior, mid-level and senior managers as well as junior, mid-level
and senior scientific and medical personnel.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>We will need to continue to grow the size
of our organization, and we may experience difficulties in managing this growth.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">As our development, manufacturing
and commercialization plans and strategies develop, we expect to add managerial, operational, sales, R&amp;D, marketing, financial and
other personnel. Current and future growth imposes and will impose significant added responsibilities on members of management, including:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">improving our operational, financial and management controls, reporting systems and procedures.</span></td></tr>
  </table><div>
</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our future financial performance
and our ability to commercialize our product candidates will depend, in part, on our ability to effectively manage our growth, and our
management may also have to divert a disproportionate amount of its attention away from&#160;day-to-day activities in order to devote
a substantial amount of time to managing these growth activities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We currently rely, and for
the foreseeable future will continue to rely, in substantial part on certain independent organizations, advisors and consultants. There
can be no assurance that the services of independent organizations, advisors and consultants will continue to be available to us on a
timely basis when needed, or that we can find qualified replacements. We may also be subject to penalties or other liabilities if we mis-classify
employees as consultants. In addition, if we are unable to effectively manage our outsourced activities or if the quality or accuracy
of the services provided by consultants is compromised for any reason, our clinical trials may be extended, delayed or terminated, and
we may not be able to obtain regulatory approval of our product candidates or otherwise advance our business. There can be no assurance
that we will be able to manage our existing consultants or find other competent outside contractors and consultants on economically reasonable
terms, or at all.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If we are not able to effectively
expand our organization by hiring and retaining employees and expanding our groups of consultants and contractors, we may not be able
to successfully implement the tasks necessary to further develop, manufacture and commercialize our product candidates and, accordingly,
may not achieve our research, development, manufacturing and commercialization goals. Conversely, if we expand ahead of our business progress,
we may take on unnecessary costs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>We may form or seek strategic alliances
or enter into licensing arrangements in the future, and we may not realize the benefits of such alliances or licensing arrangements.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We may form or seek strategic
alliances, create joint ventures or collaborations or enter into licensing arrangements with third parties that we believe will complement
or augment our development and commercialization efforts with respect to our product candidates and any future product candidates that
we may develop. Any of these relationships may require us to incur non-recurring and other charges, increase our near and long-term expenditures,
issue securities that dilute our existing stockholders or disrupt our management and business. In addition, we face significant competition
in seeking appropriate strategic partners and the negotiation process is time-consuming and complex. Moreover, we may not be successful
in our efforts to establish a strategic partnership or other alternative arrangements for our product candidates because they may be deemed
to be at too early of a stage of development for collaborative effort and third parties may not view our product candidates as having
the requisite potential to demonstrate safety and efficacy. Any delays in entering into strategic partnership agreements related to our
product candidates could delay the development and commercialization of our product candidates in certain geographies for certain indications,
which would harm our business prospects, financial condition and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If we license products or
new technologies or acquire businesses, we may not be able to realize the benefit of such transactions if we are unable to successfully
integrate them with our existing operations and company culture. For instance, certain of our agreements may require significant R&amp;D
that may not result in the development and commercialization of product candidates. We cannot be certain that, following a strategic transaction
or license, we will achieve the results, revenue or specific net income that justifies such transaction.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>We will need substantial additional financing
to develop our product candidates and implement our operating plans, which financing we may be unable to obtain, or unable to obtain on
acceptable terms. If we fail to obtain additional financing, we may be unable to complete the development and commercialization of our
product candidates.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We expect to spend a substantial
amount of capital in the development and manufacturing of our product candidates, and we will need substantial additional financing to
do so. In particular, we will require substantial additional financing to enable commercial production of our product candidates and initiate
and complete registrational trials for multiple products in multiple regions. Further, if approved, we will require significant additional
capital in order to launch and commercialize our product candidates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">As of September 30, 2024,
we had approximately $3.3 million in cash and cash equivalents. Changing circumstances may cause us to consume capital significantly faster
than we currently anticipate, and we may need to spend more money than currently expected because of circumstances beyond our control.
We may also need to raise additional capital sooner than we currently anticipate if we choose to expand more rapidly than we presently
plan. In any event, we will require additional capital for the further development and commercialization of our product candidates, including
funding our internal manufacturing capabilities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We cannot be certain that
additional funding will be available on acceptable terms, or at all. We have no committed source of additional capital. If we are unable
to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue
the development or commercialization of our product candidates or other R&amp;D initiatives. We could be required to seek collaborators
for our product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise
be available or relinquish or license on unfavorable terms our rights to our product candidates in markets where we otherwise would seek
to pursue development or commercialization ourselves.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Any of the above events could
significantly harm our business, prospects, financial condition and results of operations and cause the price of our Common Stock to decline.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Raising additional capital may cause dilution
to our stockholders, restrict our operations or require us to relinquish rights to our product candidates.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Until such time, if ever,
as we can generate substantial revenue from the sale of our product candidates, we will need substantial additional financing to develop
our product candidates and implement our operating plans. To the extent that we raise additional capital through the sale of equity or
convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other
preferences that could adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available,
may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional
debt, making capital expenditures or declaring dividends.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If we raise additional funds
through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required
to relinquish valuable rights to our research programs or product candidates or grant licenses on terms that may not be favorable to us
or that may be at less than the full potential value of such rights. If we are unable to raise additional funds through equity or debt
financings or other arrangements with third parties when needed, we may be required to delay, limit, reduce or terminate our drug development
or future commercialization efforts or grant rights to third parties to develop and market product candidates that we would otherwise
prefer to develop and market ourselves.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>The issuance of shares of our Common Stock
upon conversion or exercise of our outstanding Preferred Shares and Common Warrants and other securities that we may issue in future financing
transactions may result in substantial dilution to our stockholders.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">As of the date of this prospectus,
the Company currently has outstanding (i) 2,133 shares of Series A Preferred Stock with a conversion value of approximately $2.7 million,
convertible into shares of Common Stock at a conversion rate of the stated value thereof divided by a current effective conversion price
of approximately $0.05; (ii) 486 shares of Series B Preferred Stock with a conversion value of approximately $0.6 million, convertible
into shares of Common Stock at a conversion rate of the stated value thereof divided by a current effective conversion price of approximately $0.05;
(iii) 2,853 shares of Series C Preferred Stock with a stated value of approximately $2.9 million, convertible into shares of Common Stock
at a conversion rate of the stated value thereof divided by a conversion price of $0.022; (iv) 1,563 Preferred Warrants to purchase shares
of Series A Preferred Stock at an exercise price of $1,000, which would result in Series A Preferred Stock with a conversion value of
approximately $2.0 million, convertible into shares of Common Stock at a conversion rate of the stated value thereof divided by a current
effective estimated conversion price of $0.05; (v) 612,746 Series A Warrants to purchase shares of Common Stock at an exercise price of
$1.39 per share; (vi) 8,175,166 Series C Warrants to purchase shares of Common Stock at an exercise price of $0.098; and (vii) 10,130,245
Public Warrants and Private Placement Warrants to purchase shares of Common Stock at exercise prices ranging from $9.20 to $11.50 per
share.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">

</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Although each of the conversion
price of the Preferred Shares and the exercise price of the Series A Preferred Warrants are at or above the trading price of our Common
Stock as of the date of this prospectus, if such trading price increases, such conversion prices and exercise price will not change as
a result thereof and could be below the trading price of our Common Stock as of the date of any future conversion or exercise thereof,
resulting in dilution to our stockholders. In addition, the terms of the Series A Preferred Stock, the Series B Preferred Stock and the
Series C Preferred Stock contain certain penalties and adjustments to the amount included in determination of the conversion rate following
certain breaches of the Company&#8217;s obligations thereunder, including, among other things, as a result of a failure to file or cause
the SEC to declare one or more registration statements relating to the resale of the shares of Common Stock issuable upon conversion thereof
by specified deadlines, certain defaults under indebtedness of the Company or judgments against the Company and failure to deliver shares
of Common Stock upon conversion in a timely manner. For example, the penalties and adjustments include a 25% premium added to the stated
value for determining the conversion rate in connection with breaches other than the breach of the requirement to redeem the shares of
Series A Preferred Stock and Series B Preferred Stock by August 14, 2025, which results in a 50% premium, and the addition to the stated
value of an amount equal to the value of the shares of Common Stock into which the Series A Preferred Stock or Series B Preferred Stock
would have been convertible if the conversion price were equal to 80% of the lowest volume weighted average price during the five trading
days immediately prior to conversion. Such penalties and adjustments, which applied during the period when all of the conversions since
the Business Combination described in the preceding paragraph occurred as a result of a failure to file and cause the SEC to declare a
registration statement with respect to the resale of the underlying shares in a timely manner, have resulted and may in the future result
in the issuance of shares of Common Stock at an effective conversion price below the trading price of our Common Stock at the time of
such conversion.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We cannot assure you that
we will remain in compliance with all of the terms of the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock
and that such penalties and adjustments will not apply in the future. In addition, we cannot assure you that we will not issue additional
convertible or other derivative securities with highly dilutive penalty or adjustment provisions. As described elsewhere in this report,
the Company needs to obtain financing to fund its research and development activities and, if the IND is accepted, clinical trials, as
well as other operations. Under challenging conditions in the equity capital markets, particularly for pre-commercialization biotech companies,
we may have no viable alternatives to agreeing to inclusion of such provisions in the terms of future financings.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>If our security measures, or those of our
CROs, CDMOs, collaborators, contractors, consultants or other third parties upon whom we rely, are compromised or the security, confidentiality,
integrity or availability of our information technology, software, services, networks, communications or data is compromised, limited
or fails, we could experience a material adverse impact.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In the ordinary course of
our business, we may collect, process, receive, store, use, generate, transfer, disclose, make accessible, protect, secure, dispose of,
transmit, and share (collectively processing) proprietary, confidential and sensitive information, including personal data (including
health information), intellectual property, trade secrets, and proprietary business information owned or controlled by ourselves or other
parties. We may also share or receive sensitive information with our partners, CROs, CDMOs, or other third parties. Our ability to monitor
these third parties&#8217; information security practices is limited, and these third parties may not have adequate information security
measures in place. If we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced a security
incident, we may also experience adverse consequences.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our internal computer systems
and those of our CROs, CDMOs, collaborators, contractors, consultants or other third parties are vulnerable to damage from computer viruses,
unauthorized access, cybersecurity threats, and telecommunication and electrical failures. In addition, as many of our personnel work
from home at least part of the time and utilize network connections outside our premises, this poses increased risks to our information
technology systems and data. Cyberattacks, malicious internet-based activity, and online and offline fraud are prevalent and are increasing
in their frequency, sophistication and intensity, and have become increasingly difficult to detect. These threats come from a variety
of sources, including traditional computer &#8220;hackers,&#8221; &#8220;hacktivists,&#8221; organized criminal threat actors, threat
actors, personnel (such as through theft or misuse), sophisticated nation-states, and nation-state-supported actors. Some actors now engage
and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and
in conjunction with military conflicts and defense activities. During times of war and other major conflicts, we, and the third parties
upon which we rely, may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially
disrupt our systems and operations, supply chain, and ability to produce and distribute our product candidates. We and the third parties
upon which we rely are subject to a variety of evolving threats, including social-engineering attacks (including through phishing attacks),
malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service
(such as credential stuffing), credential harvesting, social engineering attacks (including through phishing attacks), viruses, ransomware,
supply chain attacks, personnel misconduct or error and other similar threats. We may also be the subject of software bugs, server malfunction,
software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures or other similar
issues. In particular, ransomware attacks are becoming increasingly prevalent and severe and can lead to significant interruptions, delays,
or outages in our operations, disruptions to our clinical trials, loss of data (including data related to clinical trials), significant
expense to restore data or systems, reputational loss and the diversion of funds. Extortion payments may alleviate the negative impact
of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting
such payments. Similarly, supply chain attacks have increased in frequency and severity, and we cannot guarantee that third parties and
infrastructure in our supply chain have not been compromised or that they do not contain exploitable defects or bugs that could result
in a breach to our information technology systems or the third-party information technology systems that support us and our services.
Future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities,
as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities&#8217; systems and technologies.
Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it
may be difficult to integrate companies into our information technology environment and security program.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Any of the previously identified
or similar threats could cause a security incident or other interruption. A security incident or other interruption could result in unauthorized,
unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive
information. A security incident or other interruption could disrupt our ability (and that of third parties upon whom we rely) to manufacture
or deliver our product candidates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We may expend significant
resources, or modify our business activities and operations, including our clinical trial activities, in an effort to protect against
security incidents. Certain data privacy and security obligations may require us to implement and maintain specific security measures
or use industry-standard or reasonable security measures to protect our information technology systems and sensitive information.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Although we have implemented
security measures designed to protect against security incidents, there can be no assurance that these measures will be effective. We
have experienced attempts to compromise our information technology systems or otherwise cause a security incident, but, to our knowledge,
such attempts have been unsuccessful. In addition, from time to time, our vendors inform us of security incidents. To date, our review
of such incidents as reported to us did not reveal material information being lost, CERo-specific security vulnerabilities or provide
any useful information or insight into our systems or environment. However, we may not have all information related to such incidents
and future incidents could have an adverse impact on our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We may be unable to detect
vulnerabilities in our information technology systems because such threats and techniques change frequently, are often sophisticated in
nature, and may not be detected until after a security incident has occurred. Despite our efforts to identify and remediate exploitable
critical vulnerabilities, if any, in our information technology systems, our efforts may not be successful. Further, we may experience
delays in developing and deploying remedial measures designed to address any such identified vulnerabilities. Any failure to prevent or
mitigate security incidents or improper access to, use of, or disclosure of our clinical data or patients&#8217; personal data could result
in significant liability under state, federal, and international law and may cause a material adverse impact to our reputation, affect
our ability to conduct our clinical trials and potentially disrupt our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Applicable data protection
laws, privacy policies and data protection obligations may require us to notify relevant stakeholders of security incidents. Such disclosures
are costly, and the disclosures or the failure to comply with such requirements could lead to adverse consequences. If we (or a third
party upon whom we rely) experience a security incident or are perceived to have experienced a security incident, we may also experience
adverse consequences. These consequences may include: government enforcement actions (for example, investigations, fines, penalties, audits,
and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive information (including personal
data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions;
interruptions in our operations (including availability of data); financial loss; and other similar harms.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our contracts may not contain
limitations of liability, and even where they do, there can be no assurance that the limitations of liability in our contracts are sufficient
to protect us from liabilities, damages, or claims related to our data privacy and security obligations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We cannot be sure that our
insurance coverage will be adequate or sufficient to protect us from or adequately mitigate liabilities arising out of our privacy and
security practices, or that such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage
will pay future claims.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Disruptions at the FDA, the SEC and other
government agencies caused by funding shortages or global health concerns could hinder their ability to hire and retain key leadership
and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent
those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact
our business.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The ability of the FDA to
review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire
and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times at the
agency have fluctuated in recent&#160;years as a result. In addition, government funding of the SEC and other government agencies on which
our operations may rely, including those that fund R&amp;D activities is subject to the political process, which is inherently fluid and
unpredictable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Disruptions at the FDA and
other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would
adversely affect our business. For example, over the last several&#160;years the U.S.&#160;government has shut down several times and
certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC and other government employees and stop
critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review
and process our regulatory submissions, which could have a material adverse effect on our business. Further, in our operations as a public
company, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly
capitalize and continue our operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Since March&#160;2020, when
foreign and domestic inspections of facilities were largely placed on hold, the FDA has been working to resume pre-pandemic levels of
inspection activities, including routine surveillance, bioresearch monitoring and pre-approval inspections. Should the FDA determine that
an inspection is necessary for approval and an inspection cannot be completed during the review cycle due to restrictions on travel or
otherwise, and the FDA does not determine a remote interactive evaluation to be adequate, the FDA has stated that it generally intends
to issue, depending on the circumstances, a complete response letter or defer action on the application until an inspection can be completed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Business disruptions, including financial
institution distress, could seriously harm our future revenue and financial condition and increase our costs and expenses.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our operations, and those
of our CROs, CDMOs and other contractors and consultants, could be subject to earthquakes, power shortages, telecommunications failures,
water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical pandemics or epidemics and other natural or
man-made disasters or business interruptions. The occurrence of any of these business disruptions could seriously harm our operations
and financial condition and increase our costs and expenses. Our ability to obtain clinical supplies of our product candidates could be
disrupted if the operations of these suppliers are affected by a man-made or natural disaster or other business interruption.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Our employees, independent contractors,
consultants, commercial partners and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory
standards and requirements.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We are exposed to the risk
of employee fraud or other illegal activity by our employees, independent contractors, consultants, commercial partners and vendors. Misconduct
by these parties could include intentional, reckless and/or negligent conduct that fails to comply with the regulations of the FDA and
other similar foreign regulatory authorities, provide true, complete and accurate information to the FDA and other similar foreign regulatory
authorities, comply with manufacturing standards we have established, comply with healthcare fraud and abuse laws in the United States
and similar foreign fraudulent misconduct laws or report financial information or data accurately or to disclose unauthorized activities
to us. If we obtain FDA approval of any of our product candidates and begin commercializing those products in the United States, our potential
exposure under such laws and regulations will increase significantly, and our costs associated with compliance with such laws and regulations
are also likely to increase. These laws may impact, among other things, our current activities with principal investigators and research
patients, as well as proposed and future sales, marketing and education programs. In particular, the promotion, sales and marketing of
healthcare items and services, as well as certain business arrangements in the healthcare industry, are subject to extensive laws designed
to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range
of pricing, discounting, marketing and promotion, structuring and commission(s), certain customer incentive programs and other business
arrangements generally. For more information, see the section entitled &#8220;<i>Business&#8211; Healthcare Laws and Regulations.</i>&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The distribution of biotechnology
and biopharmaceutical products is subject to additional requirements and regulations, including extensive record-keeping, licensing, storage
and security requirements intended to prevent the unauthorized sale of biotechnology and biopharmaceutical products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The scope and enforcement
of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of
the lack of applicable precedent and regulations. Ensuring business arrangements comply with applicable healthcare laws, as well as responding
to possible investigations by government authorities, can be time- and resource-consuming and can divert a company&#8217;s attention from
other aspects of its business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">It is not always possible
to identify and deter employee misconduct, and our code of ethics and the other precautions we take to detect and prevent inappropriate
conduct may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations
or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Efforts to ensure that our
business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. Because
of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our
business activities could be subject to challenge under one or more of such laws. It is possible that governmental authorities will conclude
that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse
or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental
regulations that may apply to us, we may be subject to significant criminal, civil and administrative sanctions including monetary penalties,
damages, fines, disgorgement, diminished profits and future earnings, individual imprisonment, and exclusion from participation in government
funded healthcare programs, such as Medicare and Medicaid, additional reporting requirements and oversight if we become subject to a corporate
integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, reputational harm, and we may be required
to curtail or restructure our operations, any of which could adversely affect our ability to operate our business and our results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The shifting compliance environment
and the need to build and maintain robust and expandable systems to comply with multiple jurisdictions with different compliance and/or
reporting requirements increases the possibility that a healthcare company may run afoul of one or more of the requirements. Any action
against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses
and divert our management&#8217;s attention from the operation of our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The provision of benefits
or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or use of medicinal
products is also prohibited in the European Union.&#160;The provision of benefits or advantages to induce or reward improper performance
generally is typically governed by the national anti-bribery laws of European Union Member States, and in respect of the U.K. (which is
longer a member of the European Union), the U.K.&#160;Bribery Act&#160;2010. Infringement of these laws could result in substantial fines
and imprisonment. European Union Directive 2001/83/EC, which is the European Union Directive governing medicinal products for human use,
further provides that, where medicinal products are being promoted to persons qualified to prescribe or supply them, no gifts, pecuniary
advantages or benefits in kind may be supplied, offered or promised to such persons unless they are inexpensive and relevant to the practice
of medicine or pharmacy. This provision has been transposed into the Human Medicines Regulations 2012 and so remains applicable in the
UK despite its departure from the European Union. Payments made to physicians in certain European Union Member States must be publicly
disclosed. Moreover, agreements with physicians often must be the subject of prior notification and approval by the physician&#8217;s
employer, his or her competent professional organization and/or the regulatory authorities of the individual European Union Member States.
These requirements are provided in the national laws, industry codes or professional codes of conduct, applicable in the European Union
Member States. Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties,
fines or imprisonment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The collection, use, disclosure,
transfer, or other processing of personal data regarding individuals in the European Union, including personal health data, is subject
to the European Union General Data Protection Regulation (&#8220;GDPR&#8221;), which became effective on May&#160;25, 2018, as well as
the United Kingdom&#8217;s General Data Protection Regulations (the &#8220;UK GDPR&#8221;), which, together with the amended UK Data Protection
Act&#160;2018, retains the GDPR in UK national law. The GDPR is wide-ranging in scope and imposes numerous requirements on companies that
process personal data, including requirements relating to processing health and other sensitive data, obtaining consent of the individuals
to whom the personal data relates, providing information to individuals regarding data processing activities, implementing safeguards
to protect the security and confidentiality of personal data, providing notification of data breaches, and taking certain measures when
engaging third-party processors. The GDPR also imposes strict rules on the transfer of personal data to countries outside the European
Union, including the United&#160;States, and permits data protection authorities to impose large penalties for violations of the GDPR,
including potential fines of up to &#8364;20&#160;million or 4% of annual global revenues, whichever is greater; UK GDPR mirrors such fines
under the GDPR.&#160;The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with
supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR.&#160;Compliance
with the GDPR will be a rigorous and time-intensive process that may increase our cost of doing business or require us to change our business
practices, and despite those efforts, there is a risk that we may be subject to fines and penalties, litigation, and reputational harm
in connection with European activities. This and other future developments regarding the flow of data across borders could increase the
cost and complexity of delivering our product candidates, if approved, in some markets and may lead to governmental enforcement actions,
litigation, fines and penalties or adverse publicity, which could have an adverse effect on our reputation and business.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Our product candidates may cause undesirable
side effects or have other properties that could halt their clinical development, prevent their regulatory approval, limit their commercial
potential or result in significant negative consequences.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Future undesirable or unacceptable
side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and
could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign regulatory
authorities. Results of our clinical trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected
characteristics. Approved autologous T cell therapies and those under development by other companies have shown frequent rates of CRS,
neurotoxicity, serious infections, prolonged cytopenia and hypogammaglobulinemia, and adverse events have resulted in the death of patients.
Similar adverse events may occur for our T cell product candidates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, we utilize a
lymphodepletion regimen, which generally includes fludarabine, cyclophosphamide or bendamustine, that may cause serious adverse events.
For instance, because the regimen will cause a transient and sometimes prolonged immune suppression, patients will have an increased risk
of infection, such as to COVID-19, that may be unable to be cleared by the patient and ultimately lead to other serious adverse events
or death. Our lymphodepletion regimen has caused and may also cause prolonged cytopenia and aplastic anemia.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We may also combine the use
of our product candidates with other investigational or approved therapies that may cause separate adverse events or events related to
the combination or potentiate side effects of approved drugs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If unacceptable toxicities
arise in the development of our product candidates, we could suspend or terminate our trials or the FDA, the EMA or comparable foreign
regulatory authorities could order us to cease clinical trials or deny approval of our product candidates for any or all targeted indications.
Any data safety monitoring board may also suspend or terminate a clinical trial at any time on various grounds, including a finding that
the research patients are being exposed to an unacceptable health risk, including risks inferred from other unrelated immunotherapy trials.
Treatment-related side effects could also affect patient recruitment or the ability of enrolled subjects to complete the trial or result
in potential product liability claims. In addition, these side effects may not be appropriately recognized or managed by the treating
medical staff, as toxicities resulting from T cell therapy are not normally encountered in the general patient population and by medical
personnel. Inadequate training in recognizing or managing the potential side effects of our product candidates could result in patient
deaths. Any of these occurrences may harm our business, financial condition and prospects significantly.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Our product candidates may target healthy
cells expressing target antigens, leading to potentially fatal adverse effects.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our product candidates target
specific antigens that are also expressed on healthy cells. For example, cell surface phosphatidylserine, the target of CER-1236, has
been observed on activated immune cells, including platelets, and in rapidly dividing cells across various organs including the gastrointestinal
system, hepatic system, cardiovascular system, renal system, pulmonary system, and the central nervous system and related peripheral nervous
system. Our product candidates may target healthy cells, leading to serious and potentially fatal adverse effects. Even though we intend
to closely monitor the side effects of our product candidates in both preclinical studies and clinical trials, we cannot guarantee that
products will not target and kill healthy cells.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Our product candidates may have serious
and potentially fatal cross-reactivity to lipids, peptides or protein sequences within the body.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our product candidates may
recognize and bind to a peptide unrelated to the target antigen to which it is designed to bind. If this peptide is expressed within normal
tissues, our product candidates may target and kill the normal tissue in a patient, leading to serious and potentially fatal adverse effects.
Additionally, our product candidates may bind with non-targeted lipids, leading to off-target reactivity. Detection of any on-target off-tumor
or non-specific-reactivity may halt or delay any ongoing clinical trials for any CER-T cell based product candidate and prevent or delay
regulatory approval. Unknown binding-reactivity of the CER-T cell binding domain to related proteins could also occur. Any non-specific
binding interactions that impacts patient safety could materially impact our ability to advance our product candidates into clinical trials
or to proceed to marketing approval and commercialization.</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>If product liability lawsuits are brought
against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We face an inherent risk
of product liability as a result of the planned clinical testing of our product candidates and will face an even greater risk if we commercialize
any products. For example, we may be sued if our product candidates cause or are perceived to cause injury or are found to be otherwise
unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects
in manufacturing, defects in design, packaging, a failure to warn of dangers inherent in the product, negligence, strict liability or
a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves
against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates.
Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability
claims may result in:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">decreased demand for our product candidates or products that we may develop;</span></td></tr>
  </table><div>
</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Failure to obtain or retain
sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit
the commercialization of products we develop, alone or with corporate collaborators. Although we plan on purchasing clinical trial insurance,
such insurance policies also have various exclusions, and we may be subject to a product liability claim for which we have no coverage.
We may have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered
by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts. Even if our agreements with any future
corporate collaborators entitle us to indemnification against losses, such indemnification may not be available or adequate should any
claim arise.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

</div><!-- Field: Page; Sequence: 42; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->28<!-- Field: /Sequence --></span></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Public opinion and scrutiny of cell-based
immune-oncology therapies for treating cancer, or negative clinical trial results from our cell-based therapy competitors, or auto-immune
cell therapy candidates, may impact public perception of our company and product candidates, or impair our ability to conduct our business.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our autologous cell therapy
platforms utilizes a relatively novel technology involving the genetic modification of cells, and no CER-T cell-based immunotherapy has
been approved to date. Public perception may be influenced by claims, such as claims that cell-based immunotherapy is unsafe, unethical,
or immoral and, consequently, our approach may not gain the acceptance of the public or the medical community. Negative public reaction
to cell-based immunotherapy in general, or negative clinical trial results from our cell-based therapy competitors, or auto-immune cell
therapy candidates, could result in greater government regulation and stricter labeling requirements of cell-based immunotherapy products,
including any of our product candidates, and could cause a decrease in the demand for any products we may develop. Adverse public attitudes
may adversely impact our ability to enroll patients in clinical trials. More restrictive government regulations or negative public opinion
could have an adverse effect on our business or financial condition and may delay or impair the development and commercialization of our
product candidates or demand for any products we may develop.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">For example, in November
2023, the FDA announced that it would be conducting an investigation into reports of T-cell malignancies following BCMA-directed or CD19-directed
autologous CAR-T cell immunotherapies following reports of T cell lymphoma in patients receiving these therapies. In January 2024, the
FDA determined that new safety information related to T cell malignancies should be included in the labeling with boxed warning language
on these malignancies for&#160;all BCMA- and CD-19-directed genetically modified autologous T cell immunotherapies.&#160;While CER-1236
and our engineered CER-T cells are&#160;designed to utilize a different mechanism of action,&#160;FDA&#8217;s investigation into CAR-T
therapies and other similar actions&#160;could result in increased government regulation, unfavorable public perception and publicity,&#160;potential
impacts on enrollment in our clinical trials, potential regulatory delays in the testing or approval of our product candidates, stricter
labeling requirements for those product candidates that are approved, and a decrease in demand for any such product candidates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Our product candidates for which we intend
to seek approval as biological products may face competition sooner than anticipated, including from other therapeutic modalities.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Affordable Care Act,
signed into law on March&#160;23, 2010, includes a subtitle called the BPCIA, which created an abbreviated approval pathway for biological
products that are biosimilar to or interchangeable with an FDA-licensed reference biological product. Under the BPCIA, an application
for a biosimilar product may not be submitted to the FDA until four&#160;years following the date that the reference product was first
licensed by the FDA.&#160;In addition, the approval of a biosimilar product may not be made effective by the FDA until 12&#160;years from
the date on which the reference product was first licensed. During this 12-year period of exclusivity, another company may still market
a competing version of the reference product if the FDA approves a full BLA for the competing product containing the sponsor&#8217;s own
preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of their product.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We believe that any of our
product candidates approved as a biological product under a BLA should qualify for the 12-year period of exclusivity. However, there is
a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider our product
candidates to be reference products for competing products, potentially creating the opportunity for generic competition sooner than anticipated.
Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation.
Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of our products in a way that is similar to
traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory
factors that are still developing.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If any approved products
are subject to biosimilar competition sooner than we expect, we will face significant pricing pressure and our commercial opportunity
will be limited.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

</div><!-- Field: Page; Sequence: 43; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->29<!-- Field: /Sequence --></span></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>The insurance coverage and reimbursement
status of newly-approved products is uncertain. Failure to obtain or maintain adequate coverage and reimbursement for new products could
limit our product revenues.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our ability to commercialize
any of our product candidates successfully will depend in part on the extent to which reimbursement for these products and related treatments
will be available from government health administration authorities, private health insurers, and other organizations. In the United&#160;States,
the principal decisions about reimbursement for new therapies are typically made by CMS, an agency within the United&#160;States Department
of Health and Human Services. CMS decides whether and to what extent a new therapy will be covered and reimbursed under Medicare, and
private payors tend to follow CMS determinations to a substantial degree. The availability and extent of reimbursement by governmental
and private payors is essential for most patients to be able to afford expensive treatments, such as cellular immunotherapy. There is
significant uncertainty related to the insurance coverage and reimbursement of newly approved products by government and third-party payors.
In particular, there is no body of established practices and precedents for reimbursement of cellular immunotherapies, and it is difficult
to predict what the regulatory authority or private payor will decide with respect to reimbursement levels for novel products such as
ours. Our product candidates may not qualify for coverage or direct reimbursement, or may be subject to limited reimbursement. If reimbursement
or insurance coverage is not available, or is available only to limited levels, we may not be able to successfully commercialize our product
candidates, if approved. Even if coverage is provided, the approved reimbursement amount may not be sufficient to allow us to establish
or maintain pricing to generate income.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, reimbursement
agencies in foreign jurisdictions may be more conservative than those in the United&#160;States. Accordingly, in markets outside the United&#160;States,
the reimbursement for our product candidates, if approved, may be reduced as compared with the United&#160;States and may be insufficient
to generate commercially reasonable revenues and profits. Moreover, increasing efforts by governmental and third-party payors, in the
United&#160;States and abroad, to cap or reduce healthcare costs may cause such organizations to limit both coverage and level of reimbursement
for new products approved, and as a result, they may not cover or provide adequate payment for our product candidates. Failure to obtain
or maintain adequate reimbursement for any products for which we receive marketing approval will adversely affect our ability to achieve
commercial success, and could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize
products, and our overall financial condition.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Even if we obtain regulatory and marketing
approval for a product candidate, our product candidates will remain subject to regulatory oversight.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Even if we receive marketing
and regulatory approval for CER-1236 or any other product candidates, regulatory authorities may still impose significant restrictions
on the indicated uses or marketing or impose ongoing requirements for potentially costly post-approval studies. CER-1236 and other product
candidates will also be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion,
sampling, record-keeping, and submission of safety and other post-market information. The FDA has significant post-market authority, including,
for example, the authority to require labeling changes based on new safety information and to require post-market studies or clinical
trials to evaluate serious safety risks related to the use of a biologic. Any regulatory approvals that we receive for CER-1236 or other
product candidates may also be subject to a REMS, limitations on the approved indicated uses for which the product may be marketed or
to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including post-approval clinical
trials, and surveillance to monitor the quality, safety, and efficacy of the product, all of which could lead to lower sales volume and
revenue. For example, the holder of an approved BLA is obligated to monitor and report adverse events and any failure of a product to
meet the specifications in the BLA.&#160;The holder of an approved BLA also must submit new or supplemental applications and obtain FDA
approval for certain changes to the approved product, product labeling, or manufacturing process. Advertising and promotional materials
must comply with FDA rules and are subject to FDA review, in addition to other potentially applicable federal and state laws.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, product manufacturers
and their facilities are subject to payment of user fees and continual review and periodic inspections by the FDA and other regulatory
authorities for compliance with cGMP requirements and adherence to commitments made in the BLA or foreign marketing application. If we,
or a regulatory authority, discover(s)&#160;previously unknown problems with a product, such as adverse events of unanticipated severity
or frequency, or problems with the facility where the product is manufactured or disagrees with the promotion, marketing or labeling of
that product, a regulatory authority may impose restrictions relative to that product, the manufacturing facility or us, including requiring
recall or withdrawal of the product from the market or suspension of manufacturing.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

</div><!-- Field: Page; Sequence: 44; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->30<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If we or our contractors
fail to comply with applicable regulatory requirements following approval of CER-1236 or our other product candidates, a regulatory authority
may:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">suspend or withdraw regulatory approval;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">suspend any ongoing clinical trials;</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Any government investigation
of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity.
The occurrence of any event or penalty described above may inhibit our ability to commercialize CER-1236 or other product candidates and
adversely affect our business, financial condition, results of operations, and prospects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Prior treatments can alter the cancer or
target of CER-T cell therapy and negatively impact chances for achieving clinical activity with our programmed T cells.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Patients with hematological
cancers receive highly toxic lympho-depleting chemotherapy as their initial treatment. These therapies can impact the viability of the
T cells collected from the patient and can contribute to highly variable responses to programmed T cell therapies. Patients could also
have received prior therapies that target the same target antigen on the cancer cells as our intended programmed T cell product candidate
and thereby lead to a selection of cancer cells with low or no expression of the target. Cancers also naturally evolve and select clones
with low or no expression of the target. As a result, our programmed T cell product candidates may not recognize the cancer cell and may
fail to achieve clinical activity. If any of our product candidates do not achieve a sufficient level of clinical activity, we may discontinue
the development of that product candidate, which could adversely affect our business, financial condition, results of operations, and
prospects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><!-- Field: Page; Sequence: 45; Value: 1 --><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0.25in; margin: 0pt 0 0pt -0.25in; text-align: justify"><b>Risks Related to Reliance on Third-Parties</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0.25in; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0in; text-align: justify"><b><i>We will rely on third parties to conduct
our clinical trials. If these third parties do not properly and successfully carry out their contractual duties or meet expected deadlines,
we may not be able to obtain regulatory approval of or commercialize our product candidates.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0.25in; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We expect to utilize and
depend upon independent investigators and collaborators, such as medical institutions, CROs, CDMOs and strategic partners to conduct our
preclinical studies under agreements with us and in connection with our clinical trials. We expect to have to negotiate budgets and contracts
with CROs, trial sites and CDMOs which may result in delays to our development timelines and increased costs. We will rely heavily on
these third parties over the course of our clinical trials and we control only certain aspects of their activities. As a result, we have
less direct control over the conduct, timing and completion of these clinical trials and the management of data developed through clinical
trials than would be the case if we were relying entirely upon our own staff. Nevertheless, we are responsible for ensuring that each
of our studies is conducted in accordance with applicable protocol, legal and regulatory requirements and scientific standards and our
reliance on third parties does not relieve us of our regulatory responsibilities. We and these third parties are required to comply with
GCPs, which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities for product candidates in
clinical development. Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators
and trial sites. If we or any of these third parties fail to comply with applicable GCP regulations, the clinical data generated in our
clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional
clinical trials before approving our marketing applications. We cannot assure you that, upon inspection, such regulatory authorities will
determine that any of our clinical trials comply with the GCP regulations. In addition, our clinical trials must be conducted with biological
product produced under cGMP regulations, including current good tissue practice (&#8220;cGTP&#8221;) regulations, and will require a large
number of test patients. Our failure or any failure by these third parties to comply with these regulations or to recruit a sufficient
number of patients may require us to repeat clinical trials, which would delay the regulatory approval process. Moreover, our business
may be implicated if any of these third parties violates federal or state fraud and abuse or false claims laws and regulations or healthcare
privacy and security laws.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Any third parties conducting
our clinical trials are not and will not be our employees and, except for remedies available to us under our agreements with such third
parties, we cannot control whether or not they devote sufficient time and resources to our product candidates. These third parties may
also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials
or other drug development activities, which could affect their performance on our behalf. If these third parties do not successfully carry
out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the
clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other
reasons, our clinical trials may be extended, delayed or terminated and we may not be able to complete development of, obtain regulatory
approval of or successfully commercialize our product candidates. As a result, our financial results and the commercial prospects for
our product candidates would be harmed, our costs could increase and our ability to generate revenue could be delayed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Switching or adding third
parties to conduct our clinical trials involves substantial cost and requires extensive management time and focus. In addition, changes
in manufacturers often involve changes in manufacturing procedures and processes, which could require that we conduct bridging studies
between our prior clinical supply used in our clinical trials and that of any new manufacturer. We may be unsuccessful in demonstrating
the comparability of clinical supplies which could require the conduct of additional clinical trials. Additionally, there is a natural
transition period when a new third party commences work. As a result, delays occur, which can materially impact our ability to meet our
desired clinical development timelines.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>We rely on third parties to manufacture
and store our clinical product supplies, and we may have to rely on third parties to produce and process our product candidates, if approved.
There can be no assurance that we will be able to establish or maintain relationships with such third parties. We may in the future establish
our own manufacturing facility and infrastructure in addition to or in lieu of relying on third parties for the manufacture of our product
candidates, which would be costly, time-consuming and which may not be successful.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our product candidates are
manufactured in the United&#160;States by third parties, and we manage all other aspects of the supply, including planning, oversight,
disposition and distribution logistics. There can be no assurance that we will not experience supply or manufacturing issues in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We have a long-term agreement
in place with a CDMO for the manufacture of CER-1236. However, we have not yet caused our product candidates to be manufactured or processed
on a commercial scale and may not be able to achieve manufacturing and processing and may be unable to create an inventory of mass-produced
product to satisfy demands for any of our product candidates. Our clinical supply will also be limited to small quantities and any latent
defects discovered in our supply could significantly delay our development timelines.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

</div><!-- Field: Page; Sequence: 46; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->32<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, our actual and
potential future reliance on a limited number of third-party manufacturers exposes us to the following risks:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We may be unable to identify manufacturers on acceptable terms or at all because the number of potential manufacturers is limited and the FDA may have questions regarding any replacement contractor. This may require new testing and regulatory interactions. In addition, a new manufacturer would have to be educated in, or develop substantially equivalent processes for, production of our products after receipt of FDA questions, if any.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Manufacturers are subject to ongoing periodic unannounced inspection by the FDA, the Drug Enforcement Administration and corresponding state agencies to ensure strict compliance with cGMP and other government regulations and corresponding foreign standards. We do not have control over third-party manufacturers&#8217; compliance with these regulations and standards.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">We may not own, or may have to share, the intellectual property rights to any improvements made by our third-party manufacturers in the manufacturing process for our products.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Our future contract manufacturers may not perform as agreed or may not remain in the contract manufacturing business for the time required to supply our clinical trials or to successfully produce, store and distribute our products.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our contract manufacturers
would also be subject to the same risks we face in developing our own manufacturing capabilities, as described above. Our current and
potential future CDMOs may also be required to shut down in response to the spread of health epidemics or pandemics, or they may prioritize
manufacturing for therapies or vaccines for other diseases. In addition, our CDMOs have certain responsibilities for storage of raw materials
and in the past have lost or failed to adequately store our raw materials. We will also rely on third parties to store our released product
candidates, and any failure to adequately store our product candidates could result in significant delay to our development timelines.
Any additional or future damage or loss of raw materials or product candidates could materially impact our ability to manufacture and
supply our product candidates. Each of these risks could delay our clinical trials, the approval, if any of our product candidates by
the FDA or the commercialization of our product candidates or result in higher costs or deprive us of potential product revenue.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, we will rely
on third parties to perform release tests on our product candidates prior to delivery to patients. If these tests are not appropriately
done and test data are not reliable, patients could be put at risk of serious harm.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>We maintain single supply relationships
for certain key components, and our business and operating results could be harmed if supply is restricted or ends or the price of raw
materials used in our suppliers&#8217; manufacturing process increases.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We are dependent on sole
suppliers or a limited number of suppliers for certain components that are integral to our product candidates, including CER-1236. If
these or other suppliers encounter financial, operating or other difficulties or if our relationship with them changes, we may be unable
to quickly establish or qualify replacement sources of supply and could face production interruptions, delays and inefficiencies. In addition,
technology changes by our vendors could disrupt access to required manufacturing capacity or require expensive, time-consuming development
efforts to adapt and integrate new equipment or processes. Our growth may exceed the capacity of one or more of these suppliers to produce
the needed equipment and materials in sufficient quantities to support our growth. Any one of these factors could harm our business and
growth prospects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

</div><!-- Field: Page; Sequence: 47; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->33<!-- Field: /Sequence --></span></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Our product candidates rely on the availability
of specialty raw materials, which may not be available to us on acceptable terms or at all.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our product candidates, including
CER-1236, require many specialty raw materials, some of which are manufactured by small companies with limited resources and experience
to support a commercial product. In addition, those suppliers normally support blood-based hospital businesses and generally do not have
the capacity to support commercial products manufactured under cGMP by biopharmaceutical firms. The suppliers may be ill-equipped to support
our needs, especially in non-routine circumstances like an FDA inspection or medical crisis, such as widespread contamination. We also
do not have contracts with many of these suppliers and may not be able to contract with them on acceptable terms or at all. Accordingly,
we may experience delays in receiving key raw materials to support clinical or commercial manufacturing.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, some of our
raw materials are currently available from a single supplier, or a small number of suppliers. For example, the type of cell culture media
and cryopreservation buffer that we currently use in our manufacturing process for the CER-T cells are available from multiple suppliers,
but each version may perform differently, requiring us to characterize them and modify our protocols if we change suppliers. Disruption
of our cell manufacturing process may affect product health, fitness, and potentially anti-tumor activity and clinical responses. In addition,
the cell processing equipment and tubing that we use in our current manufacturing process is only available from a single supplier. We
also use certain biologic materials, including certain activating antibodies, that are available from multiple suppliers, but each version
may perform differently, requiring us to characterize them and potentially modify some of our protocols if we change suppliers. We cannot
be sure that these suppliers will remain in business, or that they will not be purchased by one of our competitors or another company
that is not interested in continuing to produce these materials for our intended purpose. If we are required to change suppliers, the
materials may only be available from another supplier on terms that are less favorable to us than the terms under which we currently obtain
the materials. Accordingly, if we no longer have access to these suppliers, we may experience delays in our clinical or commercial manufacturing
which could harm our business or results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>If we or our third-party suppliers use hazardous,
non-hazardous, biological or other materials in a manner that causes injury or violates applicable law, we may be liable for damages.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our R&amp;D activities involve
the controlled use of potentially hazardous substances, including chemical and biological materials. We and our suppliers are subject
to federal, state and local laws and regulations in the United&#160;States governing the use, manufacture, storage, handling and disposal
of medical and hazardous materials. Although we believe that we and our suppliers&#8217; procedures for using, handling, storing and disposing
of these materials comply with legally prescribed standards, we and our suppliers cannot completely eliminate the risk of contamination
or injury resulting from medical or hazardous materials. As a result of any such contamination or injury, we may incur liability or local,
city, state or federal authorities may curtail the use of these materials and interrupt our business operations. In the event of an accident,
we could be held liable for damages or penalized with fines, and the liability could exceed our resources. We do not have any insurance
for liabilities arising from medical or hazardous materials. In addition, any violation in the use, manufacture, storage, handling and
disposal under foreign law may subject us to additional liability.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Compliance with applicable
environmental laws and regulations is expensive, and current or future environmental regulations may impair our research, development
and production efforts, which could harm our business, prospects, financial condition or results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0pt; margin: 0pt; text-align: justify"><b>Risks Related to Government and Regulation</b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Clinical development and the regulatory
approval process involve a lengthy and expensive process with an uncertain outcome and results of earlier studies and preclinical data,
and trials may not be predictive of future clinical trial results. If our preclinical studies and clinical trials are not sufficient to
support regulatory approval of any of our product candidates, we may incur additional costs or experience delays in completing, or ultimately
be unable to complete, the development of such product candidate.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The research, testing, manufacturing,
labeling, licensure, sale, marketing and distribution of biological products are subject to extensive regulation by the FDA and other
regulatory authorities in the United&#160;States and other countries, and such regulations differ from country to country. We are not
permitted to market our product candidates in the United&#160;States or in any foreign countries until they receive the requisite licensure
from the applicable regulatory authorities of such jurisdictions. We have not previously submitted a BLA to the FDA or similar licensure
applications to comparable foreign regulatory authorities. A BLA must include extensive preclinical and clinical data and supporting information
to establish the product candidate&#8217;s safety, purity and potency for each desired indication. The BLA must also include significant
information regarding the manufacturing controls for the product. We expect the novel nature of our product candidates to create further
challenges in obtaining regulatory approval. Accordingly, the regulatory approval pathway for our product candidates may be uncertain,
complex, expensive and lengthy, and licensure may not be obtained.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

</div><!-- Field: Page; Sequence: 48; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->34<!-- Field: /Sequence --></span></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We cannot be certain that
our preclinical studies and clinical trial results will be sufficient to support regulatory approval of our product candidates. Clinical
testing is expensive and can take many&#160;years to complete and its outcome is inherently uncertain. Human clinical trials are expensive
and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. Failure or delay can occur
at any time during the clinical trial process.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We may experience delays
in obtaining the FDA&#8217;s authorization to initiate clinical trials under future INDs and completing ongoing clinical studies of our
product candidates due to a variety of factors. Additionally, we cannot be certain that preclinical studies or clinical trials for our
product candidates will begin on time, not require redesign, enroll an adequate number of subjects on time, or be completed on schedule,
if at all. Clinical trials can be delayed or terminated for a variety of reasons, including delays or failures related to:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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  </table><div>
</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our inability to demonstrate that the clinical and other benefits of any of our product candidates outweigh any safety or other perceived risks;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">obtaining IRB or ethics committee approval at each clinical trial site;</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">recruiting an adequate number of suitable patients to participate in a clinical trial;</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">having subjects complete a clinical trial or return for post-treatment follow-up;</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt"></p><div>

</div><!-- Field: Page; Sequence: 49; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->35<!-- Field: /Sequence --></span></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">clinical trial sites deviating from clinical trial protocol or dropping out of a clinical trial;</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">addressing subject safety concerns that arise during the course of a clinical trial;</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">obtaining sufficient product supply of product candidate for use in preclinical studies or clinical trials from third-party suppliers;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We may experience numerous
adverse or unforeseen events during, or as a result of, preclinical studies and clinical trials that could delay or prevent our ability
to receive marketing approval or commercialize our product candidates, including:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">we may receive feedback from regulatory authorities that requires us to modify the design of our clinical trials;</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">we may obtain a result from preclinical studies such as a binder specificity study or a safety toxicology study that require us to modify the design of our clinical trials, abandon our research efforts for product candidates, or result in delays;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of our clinical trials at a higher rate than we anticipate;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our third-party contractors may fail to comply with regulatory requirements, fail to maintain adequate quality controls or be unable to provide us with sufficient product supply to conduct and complete preclinical studies or clinical trials of our product candidates in a timely manner, or at all;</span></td></tr>
  </table><div>
</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0.25in; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 50; Value: 1 --><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If we are required to conduct
additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to
successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not positive
or are only moderately positive or if there are safety concerns, our business and results of operations may be adversely affected and
we may incur significant additional costs. In addition, costs to treat patients with relapsed or refractory cancer and to treat potential
side effects that may result from our product candidates can be significant. Accordingly, our clinical trial costs are likely to be significantly
higher than those for more conventional therapeutic technologies or drug product candidates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We could also encounter delays
if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such clinical trials are being conducted,
by the Data Safety Monitoring Board for such clinical trial or by the FDA or other regulatory authorities. Such authorities may suspend
or terminate a clinical trial due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory
requirements or our clinical trial protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory
authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a
benefit from the product candidates, changes in governmental regulations or administrative actions or lack of adequate funding to continue
the clinical trial. For example, in July 2024, we announced a clinical hold as a result of insufficient data provided with regard to two
issues within pharmacology and toxicology of CER-1236. In November 2024, we announced that the clinical hold was resolved and that the
FDA had cleared our IND for Phase I clinical trials.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Any delay in obtaining, or
inability to obtain, applicable regulatory approval would delay or prevent commercialization of our product candidates and would materially
adversely impact our business and prospects and our ability to generate revenues from any of these product candidates will be delayed
or not realized at all. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical
trials may also ultimately lead to the denial of regulatory approval of our product candidates. If one or more of our product candidates
generally prove to be ineffective, unsafe or commercially unviable, our CER-T cell platform would have little, if any, value, which would
have a material and adverse effect on our business, financial condition, results of operations and prospects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Any of these factors, many
of which are beyond our control, may result in our failing to obtain regulatory approval to market any of our product candidates, or a
delay in such approval, which would significantly harm our business, results of operations, and prospects. Of the large number of biological
products in development, only a small percentage successfully complete the FDA or other regulatory approval processes and are commercialized.
Even if we eventually complete clinical testing and receive licensure from the FDA or applicable foreign regulatory authorities for any
of our product candidates, the FDA or the applicable foreign regulatory may license our product candidates for a more limited indication
or a narrower patient population than we originally requested, and the FDA, or applicable foreign regulatory agency, may not license our
product candidates with the labeling that we believe is necessary or desirable for the successful commercialization of such product candidates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Our manufacturing process needs to comply
with FDA regulations relating to the quality and reliability of such processes. Any failure to comply with relevant regulations could
result in delays in or termination of our clinical programs and suspension or withdrawal of any regulatory approvals.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In order to commercially
produce our products at a third party&#8217;s facility, we will need to comply with the FDA&#8217;s cGMP regulations and guidelines, including
cGTPs. We may encounter difficulties in achieving quality control and quality assurance and may experience shortages in qualified personnel.
We are subject to inspections by the FDA and comparable foreign regulatory authorities to confirm compliance with applicable regulatory
requirements. Any failure to follow cGMP, cGTP or other regulatory requirements or delay, interruption or other issues that arise in the
manufacture, fill-finish, packaging, or storage of our CER-T cells as a result of a failure of the facilities or operations of third parties
to comply with regulatory requirements or pass any regulatory authority inspection could significantly impair our ability to develop and
commercialize our CER-T cell programs, including leading to significant delays in the availability of our CER-T cells for our clinical
trials or the termination of or suspension of a clinical trial, or the delay or prevention of a filing or approval of marketing applications
for our CER-T cell product candidates. Significant non-compliance could also result in the imposition of sanctions, including warning
or untitled letters, fines, injunctions, civil penalties, failure of regulatory authorities to grant marketing approvals for our CER-T
cell product candidates, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of products, operating
restrictions and criminal prosecutions, any of which could damage our reputation and our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

</div><!-- Field: Page; Sequence: 51; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->37<!-- Field: /Sequence --></span></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Even if we receive regulatory approval for
any of our product candidates, we will be subject to ongoing obligations and continued regulatory review, which may result in significant
additional expense. Additionally, our product candidates, if approved, could be subject to labeling and other restrictions and market
withdrawal and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with
our products.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If the FDA, EMA or any other
comparable regulatory authority approves any of our product candidates, the manufacturing processes, labeling, packaging, distribution,
adverse event reporting, storage, advertising, promotion and recordkeeping for the product will be subject to extensive and ongoing regulatory
requirements. These requirements include submissions of safety and other post-marketing information and reports, registration requirements,
applicable product tracking and tracing requirements and continued compliance with cGMPs, including cGTPs, and GCP, for any clinical trials
that we conduct post-approval. Later discovery of previously unknown problems with a product, including adverse events of unanticipated
severity or frequency, or with any future potential manufacturing facilities we may own, third-party manufacturers or manufacturing processes,
or failure to comply with regulatory requirements, may result in, among other things:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or voluntary product recalls;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">refusal by the FDA, the EMA or any other comparable regulatory authority to approve pending applications or supplements to approved applications filed by us, or suspension or revocation of product approvals;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">product seizure or detention, or refusal to permit the import or export of products; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">injunctions or the imposition of civil or criminal penalties.</span></td></tr>
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</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Moreover, if any of our product
candidates are approved, our product labeling, advertising and promotion will be subject to regulatory requirements and continuing regulatory
review. The FDA strictly regulates the promotional claims that may be made about biopharmaceutical products. In particular, a product
may not be promoted for uses that are not approved by the FDA as reflected in the product&#8217;s approved labeling.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Any government investigation
of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity.
The occurrence of any event or penalty described above may inhibit our or our collaborators&#8217; ability to commercialize our product
candidates, and harm our business, financial condition and results of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, the policies
of the FDA, the EMA and other comparable regulatory authorities may change and additional government regulations may be enacted that could
prevent, limit or delay regulatory approval of our product candidates. If we are slow or unable to adapt to changes in existing requirements
or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval
that we may have obtained, which would adversely affect our business, prospects and ability to achieve or sustain profitability.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We also cannot predict the
likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either
in the United&#160;States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements,
or if we are unable to maintain regulatory compliance, marketing approval that has been obtained may be lost and we may not achieve or
sustain profitability.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

</div><!-- Field: Page; Sequence: 52; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->38<!-- Field: /Sequence --></span></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Regulatory requirements in the United&#160;States
and abroad governing cell therapy products have changed frequently and may continue to change in the future, which could negatively impact
our ability to complete clinical trials and commercialize our product candidates in a timely manner, if at all.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Regulatory requirements in
the United&#160;States and abroad governing cell therapy products have changed frequently and may continue to change in the future. In
2016, the FDA established the Office of Tissues and Advanced Therapies (&#8220;OTAT&#8221;) within its Center for Biologics Evaluation
and Research to consolidate the review of gene therapy and related products, and has established the Cellular, Tissue and Gene Therapies
Advisory Committee, among others, to advise this review. In September&#160;2022, the FDA announced retitling of OTAT to the Office of
Therapeutic Products (&#8220;OTP&#8221;) and elevation of OTP to a &#8220;Super Office&#8221; to meet its growing cell and gene therapy
workload. In addition, under guidelines issued by the National Institute of Health (the &#8220;NIH&#8221;), gene therapy clinical trials
are also subject to review and oversight by an institutional biosafety committee (&#8220;IBC&#8221;), a local institutional committee
that reviews and oversees research utilizing recombinant or synthetic nucleic acid molecules at that institution. Before a clinical trial
can begin at any institution, that institution&#8217;s institutional review board, or IRB, and its IBC assesses the safety of the research
and identifies any potential risk to public health or the environment. While the NIH guidelines are not mandatory unless the research
in question is being conducted at or sponsored by institutions receiving NIH funding of recombinant or synthetic nucleic acid molecule
research, many companies and other institutions not otherwise subject to the NIH guidelines voluntarily follow them. Moreover, serious
adverse events or developments in clinical trials of gene therapy product candidates conducted by others may cause the FDA or other regulatory
bodies to initiate a clinical hold on our clinical trials or otherwise change the requirements for approval of any of our product candidates.
Although the FDA decides whether individual cell and gene therapy protocols may proceed, the review process and determinations of other
reviewing bodies can impede or delay the initiation of a clinical trial, even if the FDA has reviewed the trial and approved its initiation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>We may seek fast track and breakthrough
therapy designations or priority review for one or more of our product candidates, but we might not receive such designation or priority
review, and even if we do, such designation or priority review may not lead to a faster development or regulatory review or approval process,
and does not assure FDA approval of our product candidates. Even if a product qualifies for such designation or priority review, the FDA
may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval
will not be shortened.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We may seek fast track, breakthrough
therapy, and/or regenerative medicine advanced therapy designations or priority review for one or more of our product candidates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The FDA may issue a fast
track designation to a product candidate if it is intended, whether alone or in combination with one or more other products, for the treatment
of a serious or life-threatening disease or condition, and it demonstrates the potential to address unmet medical needs for such a disease
or condition. Fast track designation applies to the combination of the product and the specific indication for which it is being studied.
The sponsor of a new biologic may request that the FDA designate the biologic as a fast track product at any time during the clinical
development of the product. For fast track products, sponsors may have greater interactions with the FDA during product development. A
fast track product may also be eligible for rolling review, where the FDA may consider for review sections of the BLA on a rolling basis
before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the BLA, the FDA
agrees to accept sections of the BLA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon
submission of the first section of the BLA.&#160;However, the FDA&#8217;s goal for reviewing a BLA fast track application under the PDUFA
does not begin until the last section of the application is submitted. Fast track designation may be withdrawn by the FDA if the FDA believes
that the designation is no longer supported by data emerging in the clinical trial process.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">A breakthrough therapy is
defined as a product candidate that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening
disease or condition, and preliminary clinical evidence indicates that the product candidate may demonstrate substantial improvement over
existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.
For product candidates that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor
of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective
control regimens. Product candidates designated as breakthrough therapies by the FDA are also eligible for priority review if supported
by clinical data at the time of the submission of the BLA.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Fast track designation, priority
review, and breakthrough therapy designation are within the discretion of the FDA.&#160;Accordingly, even if we believe that one of our
product candidates meets the criteria for any such designation, the FDA may disagree and instead determine not to make such designation.
In any event, the receipt of such designation may expedite the development or approval process, but do not change the standards for approval.
Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions
for qualification or decide that the time period for FDA review or approval will not be shortened.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>We may seek approval of our product candidates,
where applicable, under the FDA&#8217;s accelerated approval pathway. This pathway may not lead to a faster development, regulatory review
or approval process and does not increase the likelihood that our product candidates will receive marketing approval.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">A product may be eligible
for accelerated approval if it is designed to treat a serious or life-threatening disease or condition and generally provides a meaningful
advantage over available therapies upon a determination that the product candidate has an effect on a surrogate endpoint or intermediate
clinical endpoint that is reasonably likely to predict clinical benefit or on a clinical endpoint that can be measured earlier than irreversible
morbidity or mortality, (&#8220;IMM&#8221;) that is reasonably likely to predict an effect on IMM or other clinical benefit. The FDA considers
a clinical benefit to be a positive therapeutic effect that is clinically meaningful in the context of a given disease, such as IMM.&#160;For
the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical
sign or other measure that is thought to predict clinical benefit, but is not itself a measure of clinical benefit. An intermediate clinical
endpoint is a clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality that is reasonably
likely to predict an effect on irreversible morbidity or mortality or other clinical benefit. The accelerated approval pathway may be
used in cases in which the advantage of a new drug over available therapy may not be a direct therapeutic advantage, but is a clinically
important improvement from a patient and public health perspective. If granted, accelerated approval is usually contingent on the sponsor&#8217;s
agreement to conduct, in a diligent manner, additional post-approval confirmatory studies to verity and describe the drug&#8217;s clinical
benefit. Under the FDORA, the FDA is permitted to require, as appropriate, that a post-approval confirmatory study or studies be underway
prior to approval or within a specified time period after the date of accelerated approval was granted. FDORA also requires sponsors to
send updates to the FDA every 180&#160;days on the status of such studies, including progress toward enrollment targets, and the FDA must
promptly post this information publicly. FDORA also gives the FDA increased authority to withdraw approval of a drug or biologic granted
accelerated approval on an expedited basis if the sponsor fails to conduct such studies in a timely manner, send the necessary updates
to the FDA, or if such post-approval studies fail to verify the drug&#8217;s predicted clinical benefit. Under FDORA, the FDA is empowered
to take action, such as issuing fines, against companies that fail to conduct with due diligence any post-approval confirmatory study
or submit timely reports to the agency on their progress. In addition, the FDA currently requires, unless otherwise informed by the agency,
pre-approval of promotional materials for products receiving accelerated approval, which could adversely impact the timing of the commercial
launch of the product. Thus, even if we seek to utilize the accelerated approval pathway, we may not be able to obtain accelerated approval
and, even if we do, we may not experience a faster development, regulatory review or approval process for that product. There can be no
assurance that the FDA would allow any of the product candidates we may develop to proceed on an accelerated approval pathway, and even
if the FDA did allow such pathway, there can be no assurance that such submission or application will be accepted or that any expedited
development, review or approval will be granted on a timely basis, or at all. Moreover, even if we received accelerated approval, any
post-approval studies required to confirm and verify clinical benefit may not show such benefit, which could lead to withdrawal of any
approvals we have obtained. Receiving accelerated approval does not assure that the product&#8217;s accelerated approval will eventually
be converted to a traditional approval.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>We may not be able to obtain orphan drug
exclusivity for one or more of our product candidates, and even if we do, that exclusivity may not prevent the FDA from approving other
competing products.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Regulatory authorities may
designate drugs for relatively small patient populations as &#8220;orphan&#8221; drugs. Generally, if a product with an orphan drug designation
subsequently receives the first marketing approval for the indication for which it has such designation, the product is entitled to a
period of market exclusivity, which, subject to certain exceptions, precludes the FDA from approving another marketing application for
the same drug for the same indication for that time period. The applicable market exclusivity period is seven&#160;years in the United&#160;States.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Obtaining orphan drug exclusivity
for our product candidates may be important to our commercial strategy. If a competitor obtains orphan drug exclusivity for and approval
of a product with the same indication as our product candidates before we do, and if the competitor&#8217;s product is the same drug or
a similar medicinal product as ours, we could be excluded from the market. Even if we obtain orphan drug exclusivity after FDA approval,
we may not be able to maintain it. For example, if a competitive product that is the same drug or a similar medicinal product as our product
candidate is shown to be clinically superior to our product candidate, any orphan drug exclusivity we have obtained will not block the
approval of such competitive product. In addition, orphan drug exclusivity will not prevent the approval of a product that is the same
drug as our product candidates if the FDA finds that we cannot assure the availability of sufficient quantities of the drug to meet the
needs of the persons with the disease or condition for which the drug was designated. If one or more of these events occur, it could have
a material adverse effect on our company.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>We are subject to stringent and changing
privacy laws, regulations and standards as well as policies, contracts and other obligations related to data privacy and security. Our
actual or perceived failure to comply with such obligations could lead to enforcement or litigation (that could result in fines or penalties),
a disruption of clinical trials or commercialization of products, reputational harm, or other adverse business effects.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In the ordinary course of
business, we will collect, receive, store, process, use, generate, transfer, disclose, make accessible, protect, secure, dispose of, transmit
and share (collectively, processing) personal data and other sensitive information, including, but not limited to, proprietary and confidential
business information, trade secrets, intellectual property, and information we collect about patients in connection with clinical trials.
Accordingly, we are, or may become, subject to numerous federal, state, local and international data privacy and data security laws, regulations,
guidance, and industry standards as well as external and internal privacy and data security policies, contracts and other obligations
that apply to our processing of personal data and the processing of personal data on our behalf.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In the United&#160;States,
federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal
data privacy laws, consumer protection laws and other similar laws (e.g., unfair or deceptive acts or practices pursuant to Section&#160;5(a)&#160;of
the Federal Trade Commission Act). For example, HIPAA, as amended by the Health Information Technology for Economic and Clinical Health
Act (&#8220;HITECH&#8221;), and their respective implementing regulations, imposes requirements relating to the privacy, security and
transmission of protected health information. Among other things, HITECH, through its implementing regulations, makes certain of HIPAA&#8217;s
privacy and security standards directly applicable to business associates, defined as a person or organization, other than a member of
a covered entity&#8217;s workforce, that creates, receives, maintains or transmits protected health information for or on behalf of a
covered entity for a function or activity regulated by HIPAA as well as their covered subcontractors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, the California
Consumer Privacy Act (&#8220;CCPA&#8221;) applies to personal information of consumers, business representatives, and employees, and creates
individual privacy rights and places increased privacy and security obligations on entities handling personal data of consumers or households.
The CCPA requires covered companies to provide disclosures to California consumers, affords California residents certain rights related
to their personal data, including the right to opt-out of certain sales of personal data, and allow for a new cause of action for certain
data breaches. Although there are limited exemptions for clinical trial data under the CCPA, as our business progresses, the CCPA may
become applicable and significantly impact our business activities and exemplifies the vulnerability of our business to evolving regulatory
environment related to personal data and protected health information. Furthermore, the California Privacy Rights Act&#160;of&#160;2020,
effective January&#160;1, 2023, expands the CCPA&#8217;s requirements, including by applying to personal information of business representatives
and employees and establishing a new regulatory agency to implement and enforce the law. In addition, other states, such as Virginia and
Colorado, have also passed comprehensive privacy laws, and similar laws are being considered in several other states, as well as at the
federal and local levels. While these states, like the CCPA, also exempt some data processed in the context of clinical trials, these
developments further complicate compliance efforts, and increase legal risk and compliance costs for us and the third parties upon whom
we rely. Moreover, data privacy and security laws have been proposed at the federal, state, and local levels in recent&#160;years, which
could further complicate compliance efforts.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Outside the United&#160;States,
there are an increasing number of laws, regulations and industry standards concerning privacy, data protection, information security and
cross-border personal data transfers. For example, GDPR, UK GDPR, and China&#8217;s Personal Information Protection Law impose strict
requirements for processing personal data. Failure to comply with the requirements of the GDPR and the applicable national data protection
laws of the European Union Member States may result in fines of up to &#8364;20,000,000 or up to 4% of the total worldwide annual turnover
of the preceding financial year, whichever is higher, other administrative penalties, and private litigation related to processing of
personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests.
If we cannot implement a valid compliance mechanism for cross-border data transfers, we may face increased exposure to regulatory actions,
substantial fines, and injunctions against processing or transferring personal data from Europe or other foreign jurisdictions. The inability
to import personal data to the United&#160;States could significantly and negatively impact our business operations, including by limiting
our ability to conduct clinical trial activities in Europe and elsewhere; limiting our ability to collaborate with parties that are subject
to such cross-border data transfer or localization laws; or requiring us to increase our personal data processing capabilities and infrastructure
in foreign jurisdictions at significant expenses. European regulators have also ordered certain companies to suspend or permanently cease
certain transfers out of Europe for allegedly violating the GDPR&#8217;s cross-border data transfer limitations.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, privacy advocates
and industry groups have proposed, and may propose, standards with which we are legally or contractually bound to comply. We are also
bound by contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful.
If any of our privacy policies or related materials or statements are found to be deficient, lacking in transparency, deceptive, unfair,
or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators or other adverse consequences.</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our obligations related to
data privacy and security are quickly changing in an increasingly stringent fashion, creating some uncertainty as to the effective future
legal framework. Additionally, these obligations may be subject to differing applications and interpretations, which may be inconsistent
or conflict among jurisdictions. As a result, preparing for and complying with these obligations requires significant resources and may
necessitate changes to our information technologies, systems and practices, as well as those of any third-party collaborators, service
providers, contractors, consultants or other third parties that process personal data on our behalf.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Although we endeavor to comply
with all applicable privacy and security obligations, we may at times fail to do so or may be perceived to have failed to do so. Moreover,
despite our efforts, we may not be successful in achieving compliance if our employees, third-party collaborators, service providers,
contractors or consultants fail to comply with such obligations, which could negatively impact our business operations and compliance
posture. For example, any failure by a third-party service provider to comply with applicable law, regulations, or contractual obligations
could result in adverse effects, including inability to or interruption in our ability to operate our business and proceedings against
us by governmental entities or others. If we fail, or are perceived to have failed, to address or comply with obligations related to data
privacy and security obligations, we could face significant consequences. These consequences may include, but are not limited to, government
enforcement actions (e.g., investigations, fines, penalties, audits and inspections, and similar); litigation (including class-related
claims); additional reporting requirements and/or oversight; temporary or permanent bans on all or some processing of personal data; orders
to destroy or not use personal data; and imprisonment of company officials. Any of these events could have a material adverse effect on
our reputation, business, or financial condition.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>The impact of recent healthcare reform legislation
and other changes in the healthcare industry and in healthcare spending on us is currently unknown, and may adversely affect our business
model.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our revenue prospects could
be affected by changes in healthcare spending and policy in the United&#160;States and abroad. We operate in a highly regulated industry
and new laws, regulations or judicial decisions, or new interpretations of existing laws, regulations or decisions, related to healthcare
availability, the method of delivery or payment for healthcare products and services could negatively impact our business, operations
and financial condition.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">There have been, and likely
will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at broadening the availability
of healthcare and containing or lowering the cost of healthcare. For more information, see the section of this report titled &#8220;<i>Business
&#8211; Healthcare Laws and Regulations &#8211; Healthcare Reform.</i>&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The continuing efforts of
the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of
healthcare and/or impose price controls may adversely affect:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">our ability to obtain coverage and reimbursement approval for a product;</span></td></tr>
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</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Any reduction in reimbursement
from Medicare or other government programs may result in a similar reduction in payments from private payors, which may adversely affect
our future profitability.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Our business could be negatively impacted
by environmental, social and corporate governance matters or our reporting of such matters.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Investors have increased
their emphasis on the environmental, social and governance (&#8220;ESG&#8221;) practices of companies across all industries, including
the environmental impact of operations and human capital management. Expectations regarding voluntary ESG initiatives and disclosures
may result in increased costs (including but not limited to increased costs related to compliance, stakeholder engagement, contracting
and insurance), enhanced compliance or disclosure obligations, or other adverse impacts to our business, financial condition, or results
of operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">While we have internal efforts
directed at ESG matters and preparations for any increased required future disclosures, such initiatives may be costly and may not have
the desired effect. We may be perceived to be not acting responsibly in connection with these matters, which could negatively impact us.
Moreover, we may not be able to successfully complete such initiatives due to factors that are within or outside of our control. Even
if this is not the case, our actions may subsequently be determined to be insufficient by various stakeholders, and we may be subject
to investor or regulator engagement on our ESG efforts, even if such initiatives are currently voluntary.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Certain market participants,
including major institutional investors and capital providers, use third-party benchmarks and scores to assess companies&#8217; ESG profiles
in making investment or voting decisions. A failure to comply with investor expectations and standards, which are evolving and vary considerably,
or the perception that we have not responded appropriately to the growing concern for ESG issues, could result in reputational harm to
our business and could have an adverse effect on us. To the extent ESG matters negatively impact our reputation, it may also negatively
impact our share price as well as our access to and cost of capital and impede our ability to compete as effectively to attract and retain
employees, which may adversely impact our operations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Our ability to utilize our net operating
loss carryforwards and certain other tax attributes may be limited.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Under current law, federal
net operating losses incurred in tax&#160;years beginning after December&#160;31, 2017, may be carried forward indefinitely, but the deductibility
of such federal net operating losses is limited to 80% of taxable income. It is uncertain if and to what extent various states will conform
to federal tax laws. Under Sections 382 and 383 of the Code, and corresponding provisions of state law, if a corporation undergoes an
&#8220;ownership change&#8221; (generally defined as a greater than 50 percentage point change (by value) in the equity ownership of certain
stockholders over a rolling three-year period), the corporation&#8217;s ability to use its pre-change net operating loss carryforwards
and other pre-change tax attributes to offset its post-change income or taxes may be limited. We have not yet completed a Section&#160;382
or Section&#160;383 analysis, and therefore, there can be no assurances that any previously experienced ownership changes have not materially
limited our utilization of affected net operating loss carryforwards or other tax attributes. We may experience ownership changes in the
future, including in connection with the proposed Business Combination as a result of shifts in our stock ownership. We anticipate incurring
significant additional net losses for the foreseeable future, and our ability to utilize net operating loss carryforwards associated with
any such losses to offset future taxable income may be limited to the extent we incur future ownership changes. In addition, at the state
level, there may be periods during which the use of net operating loss carryforwards is suspended or otherwise limited, which could accelerate
or permanently increase state taxes owed. As a result, we may be unable to use all or a material portion of our net operating loss carryforwards
and other tax attributes, which could adversely affect our future cash flows.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Changes in tax laws or regulations that
are applied adversely to us or our customers may have a material adverse effect on our business, cash flow, financial condition or results
of operations.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">New income, sales, use or
other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect our business operations
and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified
or applied adversely to us. For example, the incoming Trump administration proposed various U.S.&#160;federal tax law changes, which if
enacted could have a material impact on our business, cash flows, financial condition or results of operations. In addition, it is uncertain
if and to what extent various states will conform to federal tax laws. Future tax reform legislation could have a material impact on the
value of our deferred tax assets, could result in significant one-time charges, and could increase our future U.S.&#160;tax expense.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Even if we obtain FDA approval of any of
our product candidates, we may never obtain approval or commercialize such products outside of the United&#160;States, which would limit
our ability to realize their full market potential.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In order to market any products
outside of the United&#160;States, we must establish and comply with numerous and varying regulatory requirements of other countries regarding
safety and efficacy. Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory
approval in one country does not mean that regulatory approval will be obtained in any other country. Approval procedures vary among countries
and can involve additional product testing and validation and additional administrative review periods.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Seeking foreign regulatory
approvals could result in significant delays, difficulties and costs for us and may require additional preclinical studies or clinical
trials which would be costly and time consuming. Regulatory requirements can vary widely from country to country and could delay or prevent
the introduction of our products in those countries. Satisfying these and other regulatory requirements is costly, time consuming, uncertain
and subject to unanticipated delays. In addition, our failure to obtain regulatory approval in any country may delay or have negative
effects on the process for regulatory approval in other countries. We do not have any product candidates approved for sale in any jurisdiction,
including international markets, and we do not have experience in obtaining regulatory approval in international markets. If we fail to
comply with regulatory requirements in international markets or to obtain and maintain required approvals, our ability to realize the
full market potential of our products will be harmed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Our business operations and current and
future relationships with healthcare professionals, principal investigators, consultants, customers and third-party payors in the United&#160;States
and elsewhere may be subject, directly or indirectly, to applicable anti-kickback, fraud and abuse, false claims, physician payment transparency,
health information privacy and security and other healthcare laws and regulations, which could expose us to substantial penalties.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Healthcare providers, physicians
and third-party payors in the United&#160;States and elsewhere will play a primary role in the recommendation and prescription of any
product candidates for which we obtain marketing approval. Our current and future arrangements with healthcare professionals, principal
investigators, consultants, customers and third-party payors may expose us to broadly applicable fraud and abuse and other healthcare
laws, including, without limitation, the U.S.&#160;federal Anti-Kickback Statute and the U.S.&#160;federal False Claims Act, that may
constrain the business or financial arrangements and relationships through which we sell, market and distribute any product candidates
for which we obtain marketing approval. In addition, we may be subject to physician payment transparency laws and patient privacy and
security regulation by the U.S.&#160;federal government and by the states and foreign jurisdictions in which we conduct our business.
For more information, see the section of this report titled &#8220;<i>Business &#8211; Healthcare Laws and Regulations.</i>&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Because of the breadth of
these laws and the narrowness of their exceptions and safe harbors, it is possible that our business activities can be subject to challenge
under one or more of such laws. The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current
environment of healthcare reform. Federal and state enforcement bodies have continued their scrutiny of interactions between healthcare
companies and healthcare providers, which has led to a number of significant investigations, prosecutions, convictions and settlements
in the healthcare industry.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Efforts to ensure that our
internal operations and future business arrangements with third parties will comply with applicable healthcare laws and regulations will
involve substantial costs. If our operations are found to be in violation of any of these laws or any other governmental regulations that
may apply to us, we may be subject to significant civil, criminal and administrative penalties, including, without limitation, damages,
monetary fines, imprisonment, disgorgement of profits, possible exclusion from participation in Medicare, Medicaid and other federal healthcare
programs, contractual damages, reputational harm, diminished profits and future earnings, additional reporting or oversight obligations
if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with the law and curtailment
or restructuring of our operations, any of which could adversely affect our ability to operate our business and pursue our strategy. If
any of the physicians or other healthcare providers or entities with whom we expect to do business, including future collaborators, are
found not to be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions
from participation in government healthcare programs, which could also affect our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>If we fail to comply with environmental,
health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse
effect on the success of our business. </i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We are subject to numerous
environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage,
treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including
chemicals and biological and radioactive materials. Our operations also produce hazardous waste products. We generally contract with third
parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials.
In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages,
and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Although we maintain workers&#8217;
compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous
materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental
liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or
radioactive materials.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>We may be affected by regulatory responses
to climate-related issues.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Biden administration
has made climate change and the limitation of greenhouse gas (&#8220;GHG&#8221;) emissions one of its primary objectives. Several states
and other geographic regions in the United States have also adopted legislation and regulations to reduce emissions of GHGs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On March 6, 2024, the SEC
finalized new rules for public companies that will require extensive climate-related disclosures and significant analysis of the impact
of climate-related issues on our business strategy, results of operations, and financial condition (the &#8220;SEC Climate Disclosure
Rules&#8221;), the effectiveness of which has been delayed indefinitely pending court challenges. If implemented, the new rules would
require us to disclose our material climate-related risks and opportunities, GHG emissions inventory, climate-related targets and goals,
and financial impacts of physical and transition risks. As a result of the SEC Climate Disclosure Rules, our legal, accounting, and other
compliance expenses may increase significantly, and compliance efforts may divert management time and attention. We may also be exposed
to legal or regulatory action or claims as a result of these new regulations. All of these risks could have a material adverse effect
on our business, financial position, and/or stock price.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0.25in; margin: 0pt 0 0pt -0.25in; text-align: justify"><b>Risks Related to Intellectual Property</b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Our intellectual property rights are valuable,
and any inability to protect them could reduce the value of our products, services and brand.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The loss of any procured
intellectual property rights in our products could permit our competitors to manufacture their own version of our products. We have attempted
to protect our intellectual property rights in our products through a combination of patents, confidentiality agreements, non-compete
agreements and other contractual protection mechanisms, and we will continue to do so. While we intend to defend against threats to our
intellectual property, our patents or various contractual protections may not adequately protect our intellectual property. In addition,
we could be required to expend significant resources to defend our rights to proprietary information, and may not be successful in such
defense.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">As such, we may not be successful
in preventing third parties from infringing, copying or misappropriating our intellectual property. There can also be no assurance that
pending patent applications owned by us will result in patents being issued to us, that patents issued to or licensed by us in the past
or in the future will not be challenged or circumvented by competitors or that such patents will be found to be valid or sufficiently
broad to protect our products or to provide us with any competitive advantage. Third parties could also obtain patents that may require
us to negotiate to obtain licenses to conduct our business, and any required licenses may not be available on reasonable terms or at all.
We also rely on confidentiality and non-compete agreements with certain employees, independent distributors, consultants and other parties
to protect, in part, trade secrets and other proprietary rights. There can be no assurance that these agreements will not be breached,
that we will have adequate remedies for any breach, that others will not independently develop substantially equivalent proprietary information
or that third parties will not otherwise gain access to our trade secrets or proprietary knowledge.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>It is difficult and costly to protect our
proprietary rights, and we may not be able to ensure their protection. We cannot assure investors that any of the currently pending or
future patent applications will result in granted patents, nor can we predict how long it will take for such patents to be granted.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our commercial success will
depend in part on us obtaining and maintaining patent protection and trade secret protection of our current and future product candidates,
as well as successfully defending these patents against third-party challenges. Our ability to stop third parties from making, using,
selling, offering to sell or importing our product candidates is dependent upon the extent to which we have rights under valid and enforceable
patents or trade secrets that cover these activities and the right under our licensed patents to contest alleged infringement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The patent positions of biotechnology
and pharmaceutical companies can be highly uncertain and involve complex legal and factual questions for which important legal principles
remain unresolved. No consistent policy regarding the breadth of claims allowed in pharmaceutical patents has emerged to date in the United&#160;States
or in many jurisdictions outside of the United&#160;States. Changes in either the patent laws or interpretations of patent laws in the
United&#160;States and other countries may diminish the value of our owned or licensed intellectual property. Accordingly, we cannot predict
the breadth of claims that may be enforced in the patents that may be issued from the applications we currently or may in the future own
or license from third parties. Further, if any patents we obtain or license are deemed invalid or unenforceable, our ability to commercialize
or license our technology could be adversely affected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Others have filed, and in
the future are likely to file, patent applications covering products and technologies that are similar, identical or competitive to ours
or important to our business. We cannot be certain that any patent application owned by a third party will not have priority over patent
applications filed or in-licensed by us, or that we will not be involved in interference, opposition or invalidity proceedings before
U.S.&#160;or non-U.S.&#160;patent offices.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The degree of future protection
for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or
permit us to gain or keep our competitive advantage. For example:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">others may be able to make product candidates or develop a platform similar to, or better than, ours in a way that is not covered by the claims of our licensed or owned patents;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">others may be able to make compounds that are similar to our product candidates but that are not covered by the claims of patents we own or that are licensed to us;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->46<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;</p><div>

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  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the patents of others may have an adverse effect on our business, including if others obtain patents claiming subject matter similar to or improving that covered by our patents and patent applications.</span></td></tr>
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</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Should any of these events
occur, they could significantly harm our business, results of operations and prospects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Without patent protection
on the composition of matter of our product candidates, our ability to assert our patents to stop others from using or selling our product
candidates in a non-pharmaceutically acceptable formulation may be limited.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Due to the patent laws of
a country, or the decisions of a patent examiner in a country, or our own filing strategies, we may not obtain patent coverage for all
of our product candidates or methods involving these candidates in parent patent applications. We may have to pursue divisional patent
applications or continuation patent applications in the United&#160;States and other countries to obtain claim coverage for inventions
which were disclosed but not claimed in parent patent applications.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Moreover, it is possible
that our pending patent applications will not result in granted patents, and even if such pending patent applications are granted as patents,
they may not provide a basis for intellectual property protection of commercially viable products nor provide us with any competitive
advantages. Further, it is possible that, for any of the patents that may be granted in the future, others will design around the patent
rights or identify cancer treatment methods that do not concern the rights covered by our patent rights or licenses. Further, we cannot
assure investors that other parties will not challenge any patents granted to us or that courts or regulatory agencies will hold our patents
to be valid or enforceable. We also cannot guarantee that we will be successful in defending challenges made against our patents. Any
successful third-party challenge to our patents could result in the unenforceability or invalidity of such patents, or to such patents
being interpreted narrowly or otherwise in a manner adverse to our interests. Our ability to establish or maintain a technological or
competitive advantage over our competitors may be diminished because of these uncertainties.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->47<!-- Field: /Sequence --></span></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We may also rely on trade
secrets to protect our technology, especially where we do not believe patent protection is appropriate or feasible. However, trade secrets
are difficult to protect. Although we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, outside
scientific collaborators and other advisors may unintentionally or willfully disclose our information to competitors or other third parties.
Enforcing a claim that a third party illegally obtained and is using any of our trade secrets may be expensive and time consuming, and
the outcome is unpredictable. In addition, courts outside the United&#160;States are sometimes less willing to protect trade secrets.
Moreover, our competitors may independently develop equivalent knowledge, methods and know-how.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>If we are unable to obtain and maintain
patent protection for any products we develop and for our technology, or if the scope of the patent protection obtained is not sufficiently
broad, our competitors could develop and commercialize products and technology similar or identical to ours, and our ability to commercialize
any product candidates we may develop and our technology may be adversely affected.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our success depends in large
part on our ability to obtain and maintain patent protection in the United&#160;States and other countries with respect to our product
candidates, their respective components, formulations, combination therapies, methods used to manufacture them and methods of treatment
and development that are important to our business. If we do not adequately protect our intellectual property rights, competitors may
be able to erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability.
To protect our proprietary position, we file patent applications in the United&#160;States and abroad related to our product candidates
that are important to our business; we may in the future also license or purchase patent applications filed by others. If we are unable
to secure or maintain patent protection with respect to our technology and any proprietary products and technology we develop, our business,
financial condition, results of operations and prospects could be materially harmed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We cannot provide any assurances
that any of our current or future patents have or will include claims with a scope sufficient to protect our current and future product
candidates or otherwise provide any competitive advantage. In addition, the laws of foreign countries may not protect our rights to the
same extent as the laws of the United&#160;States. Furthermore, patents have a limited lifespan. In the United&#160;States, the natural
expiration of a patent is generally 20&#160;years after its earliest U.S.&#160;non-provisional filing date. Various extensions may be
available; however, the life of a patent, and the protection it affords, is limited. Given the amount of time required for the development,
testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such
candidates are commercialized. As a result, our intellectual property may not provide us with sufficient rights to exclude others from
commercializing products similar or identical to ours. Moreover, some of our patents and patent applications are, and may in the future
be, owned by or co-owned with third parties. Any of the foregoing could have a material adverse effect on our competitive position, business,
financial conditions, results of operations and prospects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The patent prosecution process
is complex, expensive, time-consuming and inconsistent across jurisdictions. We may not be able to file, prosecute, maintain, enforce,
or license all necessary or desirable patent rights at a commercially reasonable cost or in a timely manner. In addition, we may not pursue
or obtain patent protection in all relevant markets. It is possible that we will fail to identify important patentable aspects of our
R&amp;D efforts in time to obtain any patent protection. While we enter into non-disclosure and confidentiality agreements with parties
who have access to confidential or patentable aspects of our R&amp;D efforts, including for example, our employees, former employees,
corporate collaborators, external academic scientific collaborators, CROs, contract manufacturers, consultants, advisors and other third
parties, any of these parties may breach the agreements and disclose such output before a patent application is filed, thereby endangering
our ability to seek patent protection. In addition, publications of discoveries in the scientific and scholarly literature often lag behind
the actual discoveries, and patent applications in the United&#160;States and other jurisdictions are typically not published until 18&#160;months
after filing, or in some cases not at all. Consequently, we cannot be certain that we were the first to file for patent protection on
the inventions claimed in our patents or pending patent applications.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The issuance or grant of
a patent is not irrefutable as to its inventorship, scope, validity or enforceability, and our patents may be challenged in the courts
or patent offices in the United&#160;States and abroad. There may be prior art of which we are not aware that may affect the validity
or enforceability of a patent claim. There also may be prior art of which we are aware, but which we do not believe affects the validity
or enforceability of a claim, which may, nonetheless, ultimately be found to affect the validity or enforceability of a claim. We may
in the future, become subject to a third-party pre-issuance submission of prior art or opposition, derivation, revocation, re-examination,
post-grant or <i>inter partes </i>review, or interference proceedings or other similar proceedings challenging our patent rights or the
patent rights of others in the USPTO or other foreign patent office. An unfavorable determination in any such submission, proceeding or
litigation could reduce the scope of or invalidate our patent rights, allow third parties to commercialize our technology or products
and compete directly with us, without payment to us, or extinguish our ability to manufacture or commercialize products without infringing
third-party patent rights.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Third-party claims of intellectual property
infringement may prevent or delay our product discovery and development efforts, and could increase our costs.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our commercial success depends
in part on our avoiding infringement of the patents and proprietary rights of third parties. There is a substantial amount of litigation
involving patents and other intellectual property rights in the biotechnology and pharmaceutical industries, as well as administrative
proceedings for challenging patents, including interference, reexamination, and post grant review proceedings before the USPTO or oppositions
and other comparable proceedings in foreign jurisdictions. We may be exposed to, or threatened with, future litigation by third parties
having patent or other intellectual property rights alleging that our product candidates and/or proprietary technologies infringe their
intellectual property rights. Numerous U.S.&#160;and foreign issued patents and pending patent applications, which are owned by third
parties, exist in the fields in which we are developing our product candidates. As the biotechnology and pharmaceutical industries expand
and more patents are issued, the risk increases that our product candidates may give rise to claims of infringement of the patent rights
of others. Moreover, it is not always clear to industry participants, including us, which patents cover various types of drugs, products
or their methods of use or manufacture. Thus, because of the large number of patents issued and patent applications filed in our fields,
there may be a risk that third parties allege they have patent rights encompassing our product candidates, technologies or methods.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Third parties may assert
that we are employing their proprietary technology without authorization. Generally, conducting preclinical and clinical trials and other
development activities in the United&#160;States is not considered an act of infringement. If CER-1236 or another product candidate is
cleared/approved by the FDA, a third party may then seek to enforce its patent by filing a patent infringement lawsuit against us. While
we do not believe that any patent claims that could have a materially adverse effect on the commercialization of our product candidates
are valid and enforceable, we may be incorrect in this belief, or we may not be able to prove it in litigation. In this regard, patents
issued in the United&#160;States by law enjoy a presumption of validity that can be rebutted only with evidence that is &#8220;clear and
convincing,&#8221; a heightened standard of proof. There may be issued third-party patents of which we are currently unaware with claims
to compositions, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates.
Patent applications can take many&#160;years to issue. There may be currently pending patent applications which may later result in issued
patents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our
technologies infringes upon these patents. Moreover, we may fail to identify relevant patents or incorrectly conclude that a patent is
invalid, not enforceable, exhausted, or not infringed by our activities. If any third-party patents were held by a court of competent
jurisdiction to cover the manufacturing process of our product candidates, constructs or molecules used in or formed during the manufacturing
process, or any final product itself, the holders of any such patents may be able to block our ability to commercialize the product candidate
unless we were to obtain a license under the applicable patents, or until such patents expire or they are finally determined to be held
invalid or unenforceable. Similarly, if any third-party patent were held by a court of competent jurisdiction to cover aspects of our
formulations, processes for manufacture or methods of use, the holders of any such patent may be able to block our ability to develop
and commercialize the product candidate unless we were to obtain a license or until such patent expires or is finally determined to be
held invalid or unenforceable. In either case, such a license may not be available on commercially reasonable terms or at all. If we are
unable to obtain a necessary license to a third-party patent on commercially reasonable terms, or at all, our ability to commercialize
our product candidates may be impaired or delayed, which could in turn significantly harm our business. Even if we obtain a license, it
may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. In addition, if the breadth or strength
of protection provided by our patents is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize
current or future product candidates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Parties making claims against
us may seek and obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize
our product candidates. Defense of these claims, regardless of their merit, could involve substantial litigation expense and would be
a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may
have to pay substantial damages, including treble damages and attorneys&#8217; fees for willful infringement, obtain one or more licenses
from third parties, pay royalties or redesign our infringing products, which may be impossible or require substantial time and monetary
expenditure. We cannot predict whether any such license would be available at all or whether it would be available on commercially reasonable
terms. Furthermore, even in the absence of litigation, we may need or may choose to obtain licenses from third parties to advance our
research or allow commercialization of our product candidates. We may fail to obtain any of these licenses at a reasonable cost or on
reasonable terms, if at all. In that event, we would be unable to further develop and commercialize our product candidates, which could
harm our business significantly.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We could be found liable
for monetary damages, including treble damages and attorneys&#8217; fees, if we are found to have willfully infringed a patent of a third
party. A finding of infringement could prevent us from commercializing our product candidates or any future product candidates or force
us to cease some of our business operations, which could materially harm our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Although we have reviewed
certain third-party patents and patent filings that we believe may be relevant to our therapeutic candidates or products, we have not
conducted a freedom-to-operate search or analysis for any of our therapeutic candidates or products, and we may not be aware of patents
or pending or future patent applications that, if issued, would block us from commercializing our therapeutic candidates or products.
Thus, we cannot guarantee that our therapeutic candidates or products, or our commercialization thereof, do not and will not infringe
any third party&#8217;s intellectual property.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>We may not be successful in obtaining or
maintaining necessary rights to product components and processes for our manufacturing and development pipeline through acquisitions and
in-licenses.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Presently, we have rights
to certain intellectual property, under issued patents that we own, including U.S. Patent No. 11,708,423 and EP Patent No. 3,519,441,
which relate to CER-1236, as well as additional patents which relate to certain other product candidates. U.S. Patent Application Number
16/646,530 was allowed and later issued on July 25, 2023 as U.S. Patent Number 11,708,423. This patent provides coverage over our CER-1236
product candidate and includes claims directed to a CER comprising, at least in part, a Tim-4phosphatidylserine binding domain and a TLR
signaling domain. Because additional product candidates may require the use of proprietary rights held by third parties, the growth of
our business will likely depend in part on our ability to acquire, in-license or use these proprietary rights. In addition, while we have
patent rights directed to certain T cell constructs, we may not be able to obtain intellectual property rights to broader T cell or engineered
T cell constructs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our product candidates may
also require specific formulations to work effectively and efficiently and these rights may be held by others. Similarly, efficient production
or delivery of our product candidates may also require specific compositions or methods, and the rights to these may be owned by third
parties. We may be unable to acquire or in-license any compositions, methods of use, processes or other third-party intellectual property
rights from third parties that we identify as necessary or important to our business operations. We may fail to obtain any of these licenses
at a reasonable cost or on reasonable terms, if at all, which would harm our business. We may need to cease use of the compositions or
methods covered by such third-party intellectual property rights, and may need to seek to develop alternative approaches that do not infringe
on such intellectual property rights which may entail additional costs and development delays, even if we were able to develop such alternatives,
which may not be feasible. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to
the same technologies licensed to us. In that event, we may be required to expend significant time and resources to develop or license
replacement technology. Moreover, the specific antibodies that will be used with our product candidates may be covered by the intellectual
property rights of others.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Additionally, we may collaborate
with academic institutions to accelerate our preclinical research or development under written agreements with these institutions. In
certain cases, these institutions may provide us with an option to negotiate a license to any of the institution&#8217;s rights in technology
resulting from the collaboration. Regardless of such option, we may be unable to negotiate a license within the specified timeframe or
under terms that are acceptable to us. If we are unable to do so, the institution may offer the intellectual property rights to others,
potentially blocking our ability to pursue our program. If we are unable to successfully obtain rights to required third-party intellectual
property or to maintain the existing intellectual property rights we have, we may have to abandon development of such program and our
business and financial condition could suffer.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The licensing and acquisition
of third-party intellectual property rights is a competitive area, and companies which may be more established, or have greater resources
than we do, may also be pursuing strategies to license or acquire third-party intellectual property rights that we may consider necessary
or attractive in order to commercialize our product candidates. More established companies may have a competitive advantage over us due
to their size, cash resources and greater clinical development and commercialization capabilities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>We may be involved in lawsuits to protect
or enforce our patents which could be expensive, time-consuming and unsuccessful.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Competitors may infringe
our patents. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming.
In addition, in a legal proceeding, a court may decide that one or more of our patents is not valid or is unenforceable or may refuse
to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An
adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated, held unenforceable
or interpreted narrowly and could put one or more of our pending patent applications at risk of not issuing. Defense of these claims,
regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from
our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble
damages and attorneys&#8217; fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign
our infringing products, which may be impossible or require substantial time and monetary expenditure.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Interference or derivation
proceedings provoked by third parties or brought by the USPTO may be necessary to determine the priority or provenance of inventions with
respect to our patents or patent applications or those of our prospective licensors. An unfavorable outcome could result in a loss of
our current patent rights and could require us to cease using the related technology or to attempt to license rights to it from the prevailing
party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Litigation or
interference or derivation proceedings may result in a decision adverse to our interests and, even if we are successful, may result in
substantial costs and distract our management and other employees. We may not be able to prevent, alone or with our licensors, misappropriation
of our trade secrets or confidential information, particularly in countries where the laws may not protect those rights as fully as in
the United&#160;States.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Furthermore, because of the
substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential
information could be compromised by disclosure during this type of litigation. In addition, there could be public announcements of the
results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results
to be negative, it could have a substantial adverse effect on the price of our Common Stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Obtaining and maintaining our patent protection
depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent
agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Periodic maintenance and
annuity fees on any issued patent are due to be paid to the USPTO and patent agencies outside the United&#160;States in several stages
over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural,
documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases
be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance
can result in abandonment or lapse of the patent, resulting in partial or complete loss of patent rights in the relevant jurisdiction.
Non-compliance events that could result in abandonment or lapse of a patent include failure to respond to official actions within prescribed
time limits, non-payment of fees and failure to properly legalize and submit formal documents. If we fail to maintain the patents covering
our product candidates, our competitors might be able to enter the market, which would harm our business. In addition, to the extent that
we have responsibility for taking any action related to the prosecution or maintenance of patents or patent application in-licensed from
a third party, any failure on our part to maintain the in-licensed rights could jeopardize our rights under the relevant license and may
expose us to liability.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>We may be subject to claims challenging
the inventorship of our patents and other intellectual property.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We may in the future be subject
to claims that former employees, collaborators, or other third parties have an interest in our patents or other intellectual property
as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others
who are involved in developing our product candidates. Litigation may be necessary to defend against these and other claims challenging
inventorship. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property
rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse
effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be
a distraction to management and other employees.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>We may need to license intellectual property
from third parties, and such licenses may not be available or may not be available on commercially reasonable terms.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">A third party may hold intellectual
property rights, including patent rights, that are important or necessary to the development or manufacture of our product candidates.
It may be necessary for us to use the patented or proprietary technology of third parties to commercialize our product candidates, in
which case we would be required to obtain a license from these third parties. Such a license may not be available on commercially reasonable
terms, or at all, and we could be forced to accept unfavorable contractual terms. If we are unable to obtain such licenses on commercially
reasonable terms, our business could be harmed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Issued patents covering our product candidates
could be found unpatentable, invalid or unenforceable if challenged in court or the USPTO.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If we initiate legal proceedings
against a third party to enforce a patent covering one of our product candidates, the defendant could counterclaim that the patent covering
our product candidate, as applicable, is invalid and/or unenforceable. In patent litigation in the United&#160;States, defendant counterclaims
alleging invalidity and/or unenforceability are commonplace, and there are numerous grounds upon which a third party can assert invalidity
or unenforceability of a patent. Third parties may also raise similar claims before administrative bodies in the United&#160;States or
abroad, even outside the context of litigation. Such mechanisms include <i>inter partes </i>review, <i>ex parte </i>re-examination and
post grant review in the United&#160;States, and equivalent proceedings in foreign jurisdictions (e.g.,&#160;opposition proceedings).
Such proceedings could result in revocation or amendment to our patents in such a way that they no longer cover and protect our product
candidates. The outcome following legal assertions of unpatentability, invalidity and unenforceability is unpredictable. With respect
to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we, our patent counsel and
the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of unpatentability, invalidity
and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates. Such a loss
of patent protection could have a material adverse impact on our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Changes to patent law in the United&#160;States
and in foreign jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our products.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">As is the case with other
biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing
patents in the biopharmaceutical industry involve both technological and legal complexity, and is therefore costly, time-consuming and
inherently uncertain. In addition, the United&#160;States continues to adapt to wide-ranging patent reform legislation, including legislation
that became effective starting in 2012. Moreover, recent U.S.&#160;Supreme Court rulings have narrowed the scope of patent protection
available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty
with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value
of patents, once obtained. Depending on decisions by the U.S.&#160;Congress, the federal courts, and the USPTO, the laws and regulations
governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents
and patents that we might obtain in the future. For example, in the case <i>Assoc. for Molecular Pathology v. Myriad Genetics, Inc.</i>,
the U.S.&#160;Supreme Court held that certain claims to DNA molecules are not patentable. While we do not believe that any of the patents
owned by us will be found invalid based on this decision, we cannot predict how future decisions by the courts, Congress or the USPTO
may impact the value of our patents. Similarly, any adverse changes in the patent laws of other jurisdictions could have a material adverse
effect on our business and financial condition. Changes in the laws and regulations governing patents in other jurisdictions could similarly
have an adverse effect on our ability to obtain and effectively enforce our patent rights.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>We may not be able to protect our intellectual
property rights throughout the world.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We may not be able to protect
our intellectual property rights outside the United&#160;States. Filing, prosecuting and defending patents on product candidates in all
countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United&#160;States
can be less extensive than those in the United&#160;States. In addition, the laws of some foreign countries do not protect intellectual
property rights to the same extent as federal and state laws in the United&#160;States. Consequently, we may not be able to prevent third
parties from practicing our inventions in all countries outside the United&#160;States, or from selling or importing products made using
our inventions in other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection
to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but
enforcement is not as strong as that in the United&#160;States. These products may compete with our products and our patents or other
intellectual property rights may not be effective or sufficient to prevent them from competing.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Many companies have encountered
significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries
which we could expand to, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other
intellectual property protection, particularly those relating to biopharmaceutical products, which could make it difficult for us to stop
the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce
our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of
our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing
and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other
remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around
the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>We may be subject to claims that our employees,
consultants or independent contractors have wrongfully used or disclosed confidential information of third parties.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We have received confidential
and proprietary information from third parties. In addition, we employ individuals who were previously employed at other biotechnology
or pharmaceutical companies. We may be subject to claims that we or our employees, consultants or independent contractors have inadvertently
or otherwise used or disclosed confidential information of these third parties or our employees&#8217; former employers. Litigation may
be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial
cost and be a distraction to our management and employees.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>If we are unable to protect the confidentiality
of our trade secrets, our business and competitive position would be harmed.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition to seeking patent
protection for our product candidates, we also rely on trade secrets, including unpatented know-how, technology and other proprietary
information, to maintain our competitive position. We seek to protect our trade secrets, in part, by entering into non-disclosure and
confidentiality agreements with parties who have access to them, such as our employees, consultants, advisors and other third parties.
We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants. Despite these efforts,
any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets. Monitoring unauthorized
uses and disclosures of our intellectual property is difficult, and we do not know whether the steps we have taken to protect our intellectual
property will be effective. In addition, we may not be able to obtain adequate remedies for any such breaches. Enforcing a claim that
a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable.
In addition, some courts inside and outside the United&#160;States are less willing or unwilling to protect trade secrets.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Moreover, our competitors
may independently develop knowledge, methods and know-how equivalent to our trade secrets. Competitors could purchase our products and
replicate some or all of the competitive advantages we derive from our development efforts for technologies on which we do not have patent
protection. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right
to prevent them, or those to whom they communicate it, from using that technology or information to compete with us. If any of our trade
secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Our reliance on third parties requires us
to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated
or disclosed.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Because we will rely on third
parties to research and develop and to manufacture our product candidates, we must share trade secrets with them. We seek to protect our
proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, consulting
agreements or other similar agreements with our advisors, employees, third-party contractors and consultants prior to beginning research
or disclosing proprietary information. These agreements typically limit the rights of the third parties to use and disclose our confidential
information, including our trade secrets. Despite the contractual provisions employed when working with third parties, the need to share
trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently
incorporated into the technology of others, or are disclosed or used in violation of these agreements. Given that our proprietary position
is based, in part, on our know-how and trade secrets, a competitor&#8217;s independent discovery of our trade secrets or other unauthorized
use or disclosure would impair our competitive position and may have a material adverse effect on our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, these agreements
typically restrict the ability of our advisors, employees, third-party contractors and consultants to publish data potentially relating
to our trade secrets, although our agreements may contain certain limited publication rights. For example, any academic institution that
we may collaborate with will likely expect to be granted rights to publish data arising out of such collaboration and any joint R&amp;D
programs may require us to share trade secrets under the terms of our R&amp;D or similar agreements. Despite our efforts to protect our
trade secrets, our competitors may discover our trade secrets, either through breach of our agreements with third parties, independent
development or publication of information by any of our third-party collaborators. A competitor&#8217;s discovery of our trade secrets
would impair our competitive position and have an adverse impact on our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>We may not have sufficient patent lifespan
to effectively protect our products and business.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">All of our patents are in
early stages. Patents have a limited lifespan. In the United&#160;States, the natural expiration of a patent is generally 20&#160;years
after its earliest U.S.&#160;non-provisional filing date. Given the amount of time required for the development, testing and regulatory
review of new product candidates, patents protecting such candidates might expire before or shortly after the resulting products are commercialized.
As a result, our patents may not provide us with sufficient rights to exclude others from commercializing products similar or identical
to ours. We expect to seek extensions of patent terms for our issued patents, where available. This includes in the United&#160;States
under the Hatch-Waxman Act, which permits a patent term extension of up to five&#160;years beyond the original expiration date of the
patent as compensation for regulatory delays. However, such a patent term extension cannot lengthen the remaining term of a patent beyond
a total of 14&#160;years from the product&#8217;s approval date. Only one patent applicable to an approved drug is eligible for the extension
and the application for the extension must be submitted prior to the expiration of the patent. During the period of patent term extension,
the claims of a patent are not enforceable for their full scope but are instead limited to the scope of the approved product. In addition,
the applicable authorities, including the FDA in the United&#160;States, and any comparable foreign regulatory authorities, may not agree
with our assessment of whether such extensions are available, and may refuse to grant extensions to our patents, or may grant more limited
extensions than we request. In addition, we may not be granted an extension because of, for example, failing to apply within applicable
deadlines, failing to apply prior to the expiration of relevant patents or otherwise failing to satisfy applicable requirements. The terms
of our patents may also be affected by the filing of terminal disclaimers during prosecution before the USPTO and foreign authorities
recognizing similar disclaimer mechanisms. A patent subject to a terminal disclaimer may have its term limited so that its lifespan does
not extend beyond the term of a related patent having a shorter term. If any of the foregoing occurs, any period during which we have
the right to exclusively market our product will be shorter than we would otherwise have expected, and our competitors may obtain approval
of and launch products earlier than might otherwise have been the case.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>The life of patent protection is limited,
and third parties could develop and commercialize products and technologies similar or identical to ours and compete directly with us
after a patent licensed to us expires, which could materially and adversely affect our ability to commercialize our products and technologies.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The life of a patent and
the protection it affords is limited. For example, in the United&#160;States, if all maintenance fees are timely paid, the natural expiration
of a patent is generally 20&#160;years from its earliest U.S.&#160;non-provisional filing date. In Europe, the expiration of an invention
patent is 20&#160;years from its filing date. Even if we successfully obtain patent protection for an approved product candidate, it may
face competition from biosimilar medications. Manufacturers of other drugs may challenge the scope, validity or enforceability of the
patents underlying our technology in court or before a patent office, and the patent holder may not be successful in enforcing or defending
those intellectual property rights and, as a result, we may not be able to develop or market the relevant product candidate exclusively,
which would materially adversely affect any potential sales of that product.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Given the amount of time
required for the development, testing and regulatory review of new product candidates, patents protecting such product candidates might
expire before or shortly after such product candidates are commercialized. As a result, the patents or pending applications licensed to
us may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. Even if we
believe that the patents involved are eligible for certain (and time-limited) patent term extensions, there can be no assurance that the
applicable authorities, including the FDA and the USPTO, and any equivalent regulatory authority in other countries, will agree with our
assessment of whether such extensions are available, and such authorities may refuse to grant extensions to such patents, or may grant
more limited extensions than requested. Moreover, the applicable time period or the scope of patent protection afforded could be less
than requested. If we are unable to obtain patent term extension or term of any such extension is less than requested, our competitors
may obtain approval of competing products following our patent expiration, and our business could be harmed. Changes in either the patent
laws or interpretation of the patent laws in the United&#160;States and other countries may diminish the value of our patents or narrow
the scope of our patent protection.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The patent pending applications
for our product candidates are expected to expire on various dates. Upon the expiration, we will not be able to assert such licensed patent
rights against potential competitors, which would materially adversely affect our business, financial condition, results of operations
and prospects.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0pt; margin: 0pt; text-align: justify"><b>Risks Related to Ownership of our Securities</b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Sales of a substantial number of our securities
in the public market by our existing securityholders could cause the price of our Common Stock and Warrants to fall.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The securities being offered
in this prospectus represent a substantial percentage of our outstanding shares of Common Stock and Warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Sales of a substantial number
of shares of our Common Stock in the public market could occur at any time (after the expiration of any applicable lock-up period, assuming
the satisfaction of any applicable vesting conditions and subject to the beneficial ownership and stock exchange limitations described
herein). These sales, or the perception in the market that the holders of a large number of shares of our Common Stock intend to sell
shares, could increase the volatility of the market price of our Common Stock or result in a significant decline in the public trading
price of our Common Stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The resale, or expected or
potential resale, of a substantial number of shares of our Common Stock in the public market could adversely affect the market price for
our Common Stock and make it more difficult for you to sell your holdings at times and prices that you determine are appropriate. Accordingly,
the adverse market and price pressures resulting from an offering pursuant to the registration statement may continue for an extended
period of time. Sales of substantial number of such shares in the public market could adversely affect the market price of our Common
Stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition to this prospectus,
we have filed:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">a registration statement with the SEC for purposes of registering (1) the resale from time to time of up to 35,773,704 shares of Common Stock, which consists of (i) 2,055,709 shares of Common Stock issued to certain selling securityholders for their portion of the merger consideration in connection with the consummation of the Business Combination in exchange for shares of common stock of Legacy CERo; (ii) 20,080,000 shares of Common Stock issuable upon the conversion of shares of our Series A Preferred Stock, purchased by certain investors pursuant to the First Securities Purchase Agreement; (iii) 1,252,000 shares of Common Stock issuable upon the conversion of shares of our Series B Preferred Stock, purchased by certain investors pursuant to the Second Securities Purchase Agreement; (iv) 3,171,246 shares of Common Stock initially issued to the Sponsor and distributed to its members in a distribution-in-kind immediately prior to the Business Combination; (v) 1,000,000 shares of Common Stock issued to the Sponsor, which are subject to forfeiture upon the vesting of the Tertiary Earnout Shares; (vi) 185,004 shares of Common Stock issued to investors other than the Sponsor in a private placement concurrently with the Initial Public Offering; (vii) 1,649,500 shares of our Common Stock issued to certain third-party vendors and service providers; (viii) 324,999 shares of Common Stock issuable upon the exercise of warrants to purchase shares of our Common Stock that were converted from Legacy CERo warrants (as defined below) in connection with the Business Combination; (ix) 612,746 shares of Common Stock issuable upon the exercise of warrants to purchase shares of our Common Stock sold to certain investors pursuant to the First Securities Purchase Agreement; (x) 5,000,000 shares of Common Stock issuable upon the exercise of warrants to purchase shares of our Series A Preferred Stock sold to certain investors pursuant to the First and Second Securities Purchase Agreement and conversion of the underlying shares of Series A Preferred Stock into Common Stock and (xi) 442,500 shares of Common Stock issuable upon the exercise of Private Placement Warrants to purchase shares of our Common Stock, at an exercise price of $11.50 per share, that were originally sold in a private placement concurrently with the Initial Public Offering; and (2) the issuance by us of up to 8,750,000 shares of Common Stock issuable upon the exercise of public warrants to purchase shares of our Common Stock, at an exercise price of $11.50 per share, that were originally issued in the Initial Public Offering; and</span></td></tr>
  </table><div>
</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->56<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition to any resales
pursuant to such registration statements, subject to applicable transfer restrictions and the conditions to the availability of Rule 144
for former shell companies under Rule 144(i), shares of Common Stock held by these stockholders will be eligible for resale, potentially
subject to, in the case of stockholders who are our affiliates, volume, manner of sale, and other limitations under Rule&#160;144&#160;promulgated
under the&#160;Securities Act.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, shares of our
Common Stock issuable upon exercise or vesting of incentive awards under our incentive plans are, once issued, eligible for sale in the
public market, subject to any lock-up&#160;agreements and, in some cases, limitations on volume and manner of sale applicable to affiliates
under Rule 144. Furthermore, shares of our Common Stock reserved for future issuance under our incentive plan may become available for
sale in future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The market price of shares
of our Common Stock could drop significantly if the holders of the shares of Common Stock described above sell them or are perceived by
the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future
offerings of shares of our Common Stock or other securities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Certain existing securityholders purchased
our securities at a price below the current trading price of such securities, and may experience a positive rate of return based on the
current trading price. Future investors in us may not experience a similar rate of return.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Certain of our securityholders
acquired our securities at prices below the current trading prices of our Common Stock and Public Warrants and may experience a positive
rate of return ranging from $0.00 to $0.078 based on the current trading prices. In particular, the effective purchase prices at which
certain Legacy CERo Stockholders and the Sponsor acquired their shares of our Common Stock are generally substantially less than the Initial
Public Offering price of $10.00 per share, after giving effect to the Exchange Ratio (as defined in the Business Combination Agreement).
Consequently, these securityholders may have an incentive to sell their shares of our Common Stock even if the trading price is below
the price paid by investors in the Initial Public Offering, which could cause the market price of our Common Stock to decline. Such stockholders
may realize a positive rate of return on the sale of their shares of Common Stock covered by this prospectus even if the market price
per share of our Common Stock is below $0.098 per share. On December 18, 2024, the closing prices of our Common Stock and our Public Warrants
as reported on the Nasdaq were $0.06 per share and $0.009 per Public Warrant, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Holders of our Warrants will
be less likely to exercise their Warrants if the exercise prices of their Warrants exceed the market price of our Common Stock. There
is no guarantee that our Warrants will continue to be in the money prior to their expiration, and as such, the Warrants may expire worthless.
As such, any cash proceeds that we may receive in relation to the exercise of the Warrants overlying shares of Common Stock being offered
for sale in this prospectus will be dependent on the trading price of our Common Stock. There is no assurance that the holders of the
Warrants will elect to exercise any or all of such Warrants. As of the date of this prospectus, (i) all of the Private Placement Warrants
and Public Warrants, which have an exercise price of $11.50 per share, (ii) all of the Rollover Warrants, which have an exercise price
of $10.00 per share, and (iii) all of the Series A Warrants, which have a current exercise price of $1.39 per share, are &#8220;out of
the money,&#8221; meaning the exercise price is higher than the market price of our Common Stock. Holders of such &#8220;out of the money&#8221;
Warrants are not likely to exercise such Warrants. There can be no assurance that such Warrants will be in the money prior to their respective
expiration dates, and therefore, we may not receive any cash proceeds from the exercise of such Warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>An active trading market for our Common
Stock may not be available on a consistent basis to provide stockholders with adequate liquidity. The price of our Common Stock may be
extremely volatile, and stockholders could lose all or part of their investment.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The trading price of our
Common Stock is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are
beyond our control, including limited trading volume. In addition to the factors discussed in this &#8220;<i>Risk Factors</i>&#8221; section
and elsewhere in this prospectus, these factors include:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt"></p><div>

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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, the stock market
in general, and the markets for special purpose acquisition company (&#8220;SPAC&#8221;) post-business combination businesses and healthcare
companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to
the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our Common Stock,
regardless of our actual operating performance. In addition, price volatility may be greater if the public float and trading volume of
our Common Stock is low. If the market price of our Common Stock falls, you may not realize any return on your investment and may lose
some or all of your investment. In the past, securities class action litigation has often been instituted against companies following
periods of volatility in the market price of a company&#8217;s securities. This type of litigation, if instituted, could result in substantial
costs and a diversion of management&#8217;s attention and resources, which would harm our business, operating results or financial condition.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Unstable market and economic conditions
may have serious adverse consequences on our business, financial condition and stock price.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The global economy, including
credit and financial markets, has experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability,
declines in consumer confidence, declines in economic growth, increases in unemployment rates, increases in inflation rates, higher interest
rates and uncertainty about economic stability. For example, the Russia-Ukraine war and the Israel-Hamas war created volatility in the
global capital markets and may have further global economic consequences, including disruptions of the global supply chain and energy
markets. There have also been disruptions to the U.S.&#160;banking system due to bank failures in the past several years, including with
respect to Silicon Valley Bank, Signature Bank and First Republic Bank. Any such volatility and disruptions may have adverse consequences
on us or the third parties on whom it relies. If the equity and credit markets deteriorate, including as a result of political unrest
or war, it may make any necessary debt or equity financing more difficult to obtain in a timely manner or on favorable terms, more costly
or more dilutive. Increased inflation rates can adversely affect us by increasing its costs, including labor and employee benefit costs.
In addition, higher inflation could also increase customers&#8217; operating costs, which could result in reduced budgets for customers
and potentially less demand for our products, if and when approved. Any significant increases in inflation and related increase in interest
rates could have a material adverse effect on our business, results of operations and financial condition.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>We do not intend to pay dividends on our
Common Stock, so any returns will be limited to the value of its stock.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We currently anticipate that
we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying
any cash dividends for the foreseeable future. In addition, future debt or other financing arrangements may contain terms prohibiting
or limiting the amount of dividends that may be declared or paid on our Common Stock. Any return to stockholders will therefore be limited
in the foreseeable future to the appreciation of the market price (if any) of our stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>We are an &#8220;emerging growth company&#8221;
and a &#8220;smaller reporting company&#8221;, and the reduced reporting requirements applicable to emerging growth companies and smaller
reporting companies may make our Common Stock less attractive to investors.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We are an &#8220;emerging
growth company&#8221; within the meaning of the Securities Act, as modified by the JOBS Act. For as long as we continue to be an emerging
growth company, we may take advantage of certain exemptions from various public company reporting requirements that are applicable to
other public companies that are not emerging growth companies, including being permitted to provide only two&#160;years of audited financial
statements, in addition to any required unaudited interim financial statements with correspondingly reduced &#8220;Management&#8217;s
Discussion and Analysis of Financial Condition and Results of Operations&#8221; disclosure, not being required to have its internal control
over financial reporting audited by our independent registered public accounting firm under Section&#160;404 of the Sarbanes-Oxley Act
(&#8220;Section 404&#8221;), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements,
and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden
parachute payments not previously approved. We may take advantage of these exemptions until the last&#160;day of the fiscal year ending
after the fifth anniversary of the consummation of our IPO or until we are no longer an emerging growth company, whichever is earlier.
We will cease to be an emerging growth company prior to the end of such five-year period if certain earlier events occur, including if
we become a &#8220;large accelerated filer&#8221; as defined in Rule&#160;12b-2 under the Exchange&#160;Act, our annual gross revenues
equal or exceed $1.235&#160;billion or we issue more than $1.0&#160;billion of non-convertible debt in any three-year period prior to
such time. In particular, in this prospectus on, we have provided only two&#160;years of audited financial statements and have not included
all of the executive compensation related information that would be required if it were not an emerging growth company, and it may elect
to take advantage of other reduced reporting requirements in future filings. Accordingly, the information contained herein may be different
than the information you receive from other public companies in which you hold stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, the JOBS Act
provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting
standards. We have elected to take advantage of the extended transition period to comply with new or revised accounting standards and
to adopt certain of the reduced disclosure requirements available to emerging growth companies. As a result of the accounting standards
election, we will not be subject to the same implementation timing for new or revised accounting standards as other public companies that
are not emerging growth companies, which may make comparison of its financials to those of other public companies more difficult. As a
result of these elections, the information that we provide in this prospectus may be different than the information you may receive from
other public companies in which you hold equity interests. In addition, it is possible that some investors will find our Common Stock
less attractive as a result of these elections, which may result in a less active trading market for our Common Stock and higher volatility
in its share price.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We are also a &#8220;smaller
reporting company&#8221; as defined in the Exchange&#160;Act. We may continue to be a smaller reporting company even after we is no longer
an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will
be able to take advantage of these scaled disclosures for so long as our Common Stock held by non-affiliates is less than $250.0&#160;million
measured on the last business&#160;day of our second fiscal quarter, or our annual revenue is less than $100.0&#160;million during the
most recently completed fiscal year and our Common Stock held by non-affiliates is less than $700.0&#160;million measured on the last
business&#160;day of our second fiscal quarter.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Our operating results may fluctuate significantly,
which makes future operating results difficult to predict and could cause operating results to fall below expectations or guidance.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our operations to date have
been primarily limited to researching and developing our product candidates. We have not yet obtained regulatory approvals for any of
its product candidates. Consequently, any predictions you make about our future success or viability may not be as accurate as they could
be if we had a longer operating history or approved products on the market.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our quarterly and annual
operating results may fluctuate significantly in the future, which makes it difficult for us to predict future operating results. From
time to time, we may enter into license or collaboration agreements with other companies that include development funding and significant
upfront and milestone payments and/or royalties, which may become an important source of our revenue. Accordingly, our revenue may depend
on development funding and the achievement of development and clinical milestones under current and any potential future license and collaboration
agreements and sales of our drugs, if approved. These upfront and milestone payments may vary significantly from period to period and
any such variance could cause a significant fluctuation in operating results from one period to the next.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, our measures
compensation cost for stock-based awards made to employees, directors and non-employee consultants based on the fair value of the award
on the grant date and we recognize the cost as an expense over the requisite service period, as applicable. Because the variables that
we uses as a basis for valuing stock-based awards change over time, including our underlying stock price and stock price volatility, the
magnitude of the expense that we must recognize may vary significantly.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Furthermore, operating results
may fluctuate due to a variety of other factors, many of which are outside of our control and may be difficult to predict, including the
following:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The cumulative effect of
such factors could result in large fluctuations and unpredictability in quarterly and annual operating results. As a result, comparing
operating results on a period-to-period basis may not be meaningful. Investors should not rely on past results as an indication of future
performance. This variability and unpredictability could also result in our failing to meet the expectations of industry or financial
analysts or investors for any period. If our revenue or operating results fall below the expectations of analysts or investors or below
any forecasts we may provide to the market, or if the forecasts we provide to the market are below the expectations of analysts or investors,
the price of our Common Stock could decline substantially. Such a stock price decline could occur even when we have met any previously
publicly stated revenue and/or earnings guidance we may provide.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

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under our organizational documents and Delaware law could delay or prevent a change of control which could limit the market price of our
Common Stock and may prevent or frustrate attempts by our stockholders to replace or remove our then-current management.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our Charter and Bylaws, contain
provisions that could delay or prevent a change of control of our board of directors that our stockholders might consider favorable. Some
of these provisions include:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 2.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, because we are
incorporated in Delaware, we are governed by the provisions of Section&#160;203 of the DGCL, which may prohibit certain business combinations
with stockholders owning 15% or more of our outstanding voting stock. These anti-takeover provisions and other provisions in our Charter
or Bylaws could make it more difficult for stockholders or potential acquirors to obtain control of our board of directors or initiate
actions that are opposed by the then-current board of directors and could also delay or impede a merger, tender offer, or proxy contest.
These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of
your choosing or cause us to take other corporate actions you desire. Any delay or prevention of a change of control transaction or changes
in our board of directors could cause the market price of our Common Stock to decline.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>If we engage in future acquisitions or strategic
partnerships, this may increase capital requirements, dilute stockholders, cause us to incur debt or assume contingent liabilities, and
subject us to other risks.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We intend to evaluate various
acquisition opportunities and strategic partnerships, including licensing or acquiring complementary drugs, intellectual property rights,
technologies or businesses. Any potential acquisition or strategic partnership may entail numerous risks, including:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 20.25pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, if we undertake
acquisitions, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses and acquire intangible
assets that could result in significant future amortization expense. Moreover, we may not be able to locate suitable acquisition opportunities,
and this inability could impair our ability to grow or obtain access to technology or products that may be important to the development
of our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Our Bylaws provide that the Court of Chancery
of the State of Delaware and, to the extent enforceable, the federal district courts of the United States of America will be the exclusive
forums for substantially all disputes between us and our stockholders, which could limit our stockholders&#8217; ability to obtain a favorable
judicial forum for disputes with us or our directors, officers, or employees.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Charter provides that,
unless we consent to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the exclusive forum for
the following types of actions or proceedings under Delaware statutory or common law:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">This provision would not
apply to suits brought to enforce a duty or liability created by the Exchange&#160;Act. Furthermore, Section&#160;22 of the Securities
Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal
courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent
or contrary rulings by different courts, among other considerations, the Charter further provides that, unless we consent to the selection
of an alternative forum, the federal district courts of the United&#160;States of America will be the exclusive forum for resolving any
complaint asserting a cause of action arising under the Securities Act, including all causes of action asserted against any defendant
named in such complaint. While the Delaware courts have determined that such choice of forum provisions are facially valid and several
state trial courts have enforced such provisions and required that suits asserting Securities Act claims be filed in federal court, there
is no guarantee that courts of appeal will affirm the enforceability of such provisions and a stockholder may nevertheless seek to bring
a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert
the validity and enforceability of the exclusive forum provisions of the Charter. This may require significant additional costs associated
with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those
other jurisdictions. If a court were to find either exclusive forum provision in the Charter to be inapplicable or unenforceable in an
action, we may incur further significant additional costs associated with litigating Securities Act claims in state court, or both state
and federal court, which could seriously harm our business, financial condition, results of operations, and prospects. These exclusive
forum provisions may limit a stockholder&#8217;s ability to bring a claim in a judicial forum that it finds favorable for disputes with
us or our directors, officers, or other employees, or could result in increased costs for a stockholder to bring a claim, particularly
if they do not reside in or near Delaware, both of which may discourage lawsuits against us and our directors, officers and other employees.
If a court were to find either exclusive forum provision in the Charter to be inapplicable or unenforceable in an action, we may incur
further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could seriously harm our
business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>We will incur increased costs and demands
upon management as a result of complying with the laws and regulations affecting public companies, which could adversely affect our business,
results of operations, and financial condition. </i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">As a public company, we are
subject to the reporting requirements of the Exchange Act, the listing standards of Nasdaq, and other applicable securities rules and
regulations. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting and financial
compliance costs, make some activities more difficult, time-consuming and costly, and place significant strain on our personnel, systems
and resources. For example, the Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect
to our business and results of operations. As a result of the complexity involved in complying with the rules and regulations applicable
to public companies, our management&#8217;s attention may be diverted from other business concerns, which could harm our business, results
of operations and financial condition. Although we have already hired additional employees to assist us in complying with these requirements,
we may need to hire more employees in the future or engage outside consultants, which will increase our operating expenses.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, changing laws,
regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing
legal and financial compliance costs, and making some activities more time-consuming. These laws, regulations and standards are subject
to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve
over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance
matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest substantial resources
to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses
and a diversion of management&#8217;s time and attention from business operations to compliance activities. If our efforts to comply with
new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to
their application and practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We also expect that being
a public company and these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance,
and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make
it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee
(the &#8220;Audit Committee&#8221;) and compensation committee (the &#8220;Compensation Committee&#8221;), and qualified executive officers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">As a result of disclosure
of information in the filings required of a public company, our business and financial condition will become more visible, which may result
in an increased risk of threatened or actual litigation, including by competitors and other third parties. If such claims are successful,
our business and results of operations could be harmed, and even if the claims do not result in litigation or are resolved in our favor,
these claims, and the time and resources necessary to resolve them, could divert the resources of our management and harm our business,
results of operations, and financial condition.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>As a result of becoming a public company,
we are obligated to develop and maintain proper and effective internal controls over financial reporting and any failure to maintain the
adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value of our common
stock.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We are required, pursuant
to Section&#160;404, to furnish a report by management on, among other things, the effectiveness of our internal controls over financial
reporting. In 2026, five years after our IPO, we may be required to comply with auditor attestation requirements, as required by Section&#160;404.
This will require that we incur substantial additional professional fees and internal costs to expand our accounting and finance functions
and that we expend significant management efforts.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We may identify weaknesses
in our system of internal financial and accounting controls and procedures that could result in a material misstatement of our consolidated
financial statements. Our control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter
how well designed and operated, can provide only reasonable, not absolute, assurance that the control system&#8217;s objectives will be
met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements
due to error or fraud will not occur or that all control issues and instances of fraud will be detected.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Any failure to maintain internal
control over financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations
or cash flows. If our financial statements are not accurate, investors may not have a complete understanding of our operations. If we
do not file financial statements on a timely basis as required by the SEC, we could face severe consequences. If we are unable to conclude
that its internal control over financial reporting is effective, investors may lose confidence in the accuracy and completeness of our
financial reports, the market price of our Common Stock could decline, and we could be subject to sanctions or investigations by the Nasdaq,
the SEC or other regulatory authorities. Moreover, responding to such investigations, are likely to consume a significant amount of our
management resources and cause us to incur significant legal and accounting expenses. Failure to remedy any material weakness in internal
control over financial reporting, or to maintain effective control systems, could also restrict our future access to the capital markets.
This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>As a public reporting company, we are subject
to filing deadlines for reports that we file pursuant to the Exchange Act, and our failure to timely file such reports may have material
adverse consequences on our business. </i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Following the consummation
of the Business Combination, we failed to timely file our Form 8-K with Form 10 information prior to the &#8220;staleness&#8221; date
(as determined in accordance with the applicable rules and regulations of the SEC) applicable to the financial statements that were required
by the applicable accounting requirements and other rules and regulations of the SEC to be included in such filing (including pro forma
financial information); thus, we have not remained current in our reporting requirements with the SEC since we became an SEC reporting
company on February 14, 2024. Although we have since regained status as a current filer by filing a Form 8-K/A with current financial
statements on April 1, 2024, we will not be eligible to use a registration statement on Form S-3 that would allow us to continuously incorporate
by reference our SEC reports into the registration statement, or to use &#8220;shelf&#8221; registration statements to conduct offerings,
until approximately one year from the date we regained (and maintain) status as a current filer. Until such time, if we determine to pursue
an offering, we would be required to conduct the offering on an exempt basis, such as in accordance with Rule 144A, or file a registration
statement on Form S-1. Using a Form S-1 registration statement for a public offering would likely take significantly longer than using
a registration statement on Form S-3 and increase our transaction costs, and could, to the extent we are not able to conduct offerings
using alternative methods, adversely impact our liquidity, ability to raise capital or complete acquisitions in a timely manner. The use
of Form S-1 would also prevent us from conducting offerings on a &#8220;shelf basis,&#8221; limiting our flexibility as to the terms,
timing or manner of any such offering.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We cannot guarantee that
in the future our reporting will always be timely. If we are unable to satisfy SEC filing deadlines or otherwise provide disclosures of
material information on a timely basis, stockholders and potential investors in our Common Stock may have incomplete information about
our business and results of operations, which may impact their ability to make an informed investment decision, result in a reduction
in the trading price, trading volume or analyst coverage of our Common Stock or expose us to potential liability.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>We could be subject to securities class
action litigation.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In the past, securities class
action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially
relevant for us because biopharmaceutical companies have experienced significant stock price volatility in recent&#160;years. If we face
such litigation, it could result in substantial costs and a diversion of management&#8217;s attention and resources, which could harm
our business.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Any such negative outcome
could result in payments of substantial damages or fines, damage to our reputation or adverse changes to our business practices. Defending
against litigation is costly and time-consuming, and could divert management&#8217;s attention and our resources. Furthermore, during
the course of litigation, there could be negative public announcements of the results of hearings, motions or other interim proceedings
or developments, which could have a negative effect on the market price of the our Common Stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Our failure to meet the continued listing
requirements of Nasdaq could result in a delisting of its securities.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On July 19, 2024, we received
the Bid Price Requirement Letter from the staff at Nasdaq notifying us that, for the 30 consecutive trading days prior to the date of
the Bid Price Requirement Letter, the closing bid price for the Common Stock has been below the minimum $1.00 per share required for continued
listing on Nasdaq set forth in Nasdaq Listing Rule 450(a)(1), which is required for continued listing of the Common Stock on Nasdaq (the
&#8220;Bid Price Requirement&#8221;). On October 23, 2024, the trading price for our Common Stock closed under $0.10 and was the tenth
consecutive trading day to do so.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On October 24, 2024, we received
a letter from the staff at Nasdaq notifying us that, because our Common Stock had a closing bid price of $0.10 or less for ten consecutive
trading days, it was no longer eligible to rely upon the 180-day cure period set forth in the Bid Price Requirement Letter. In addition,
on October 30, 2024, the Company received a letter from the staff at Nasdaq notifying the Company that it had not regained compliance
with the continued listing requirement to maintain a minimum market value of $50,000,000 for its listed securities within the 180-day
compliance period granted by Nasdaq in May 2024.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On July 19, 2024, we also
received a letter the MVPHS Letter from Nasdaq notifying the Company that the Market Value of Publicly Held Shares the MVPHS of the Common
Stock had been below the minimum of $15,000,000 for the last 30 consecutive business days prior to the date of the MVPHS Letter, per the
MVPHS Requirement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Each of the Bid Price Requirement
and MVLS Requirement deficiencies results in the commencement of delisting proceedings. However, we have requested a hearing from Nasdaq
which will be held on December 17, 2024, and plan to submit a plan to regain compliance with the listing requirements at such hearing.
All other&#160;delisting&#160;actions will be stayed through the hearing decision or any time provided by the hearing panel. The panel
will issue a decision, typically within 30 days of the hearing date, either granting us an extension in which to regain compliance or
denying our request and moving to delist our securities from Nasdaq. Such a delisting would likely have a negative effect on the price
of the securities and would impair your ability to sell or purchase the securities when you wish to do so. In the event of a delisting,
any action taken by us to restore compliance with listing requirements may not allow our securities to become listed again, stabilize
the market price or improve the liquidity of our securities, prevent our securities from dropping below the Nasdaq minimum share price
requirement or prevent future non-compliance with Nasdaq&#8217;s listing requirements. Additionally, if our securities are not listed
on, or become delisted from Nasdaq for any reason, and are quoted on the over-the-counter bulletin board, an inter-dealer automated quotation
system for equity securities that is not a national securities exchange, the liquidity and price of our securities may be more limited
than if we were quoted or listed on Nasdaq or another national securities exchange.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>If securities or industry analysts do not
publish research, or publish inaccurate or unfavorable research, about our business, our Common Stock share price and trading volume could
decline. </i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The trading market for our
Common Stock will depend, in part, on the research and reports that securities or industry analysts publish about us or our business.
If few or no securities or industry analysts cover us, the trading price for our Common Stock would likely be negatively impacted. If
one or more of the analysts who cover us downgrade our Common Stock or publish inaccurate or unfavorable research about our business,
our share price would likely decline. In addition, if our operating results fail to meet the forecast of analysts, our share price would
likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our Common
Stock could decrease, which might cause our share price and trading volume to decline.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Future sales of our Common Stock, or the
perception that future sales may occur, may cause the market price of our Common Stock to decline, regardless of our operating performance.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Due to the significant number
of redemptions of Class A Common Stock, in connection with the Business Combination, there was a significantly lower number of shares
of Class A Common Stock that converted into shares of our Common Stock in connection with the Business Combination. As a result, the shares
of our Common Stock being registered for resale are anticipated to constitute a considerable percentage of our public float. Additionally,
a significant portion of the shares of our Common Stock being registered for resale were purchased by securityholders pursuant to investments
in Legacy CERo that date from February 2017 onwards at prices considerably below the current market price of our Common Stock. This discrepancy
in purchase prices may have an impact on the market perception of our Common Stock&#8217;s value and could increase the volatility of
the market price of our Common Stock or result in a significant decline in the public trading price of our Common Stock. The registration
of these shares for resale creates the possibility of a significant increase in the supply of our Common Stock in the market. The increased
supply, coupled with the potential disparity in purchase prices, may lead to heightened selling pressure, which could negatively affect
the public trading price of our Common Stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Sales of a substantial number
of our shares of Common Stock and/or Public Warrants in the public market by our existing securityholders, or the perception that those
sales might occur, could depress the market price of our shares of Common Stock and Public Warrants and could impair our ability to raise
capital through the sale of additional equity securities. We are unable to predict the effect that such sales may have on the prevailing
market price of our shares of Common Stock and Public Warrants. Furthermore, the sale of a substantial number of shares of Common Stock
pursuant to this prospectus, or the perception that such sale may occur, may materially and adversely affect the prevailing market price
of our Common Stock and thus restrict the amount we are able to raise in an equity offering, or require us to issue and sell more Common
Stock to generate the same amount of gross proceeds than we would otherwise have had to, which would result in greater dilution to our
existing stockholders. We expect that because there is a large number of shares being registered pursuant to the registration statement
of which this prospectus forms a part, the holders thereunder will continue to offer the securities covered thereby for a significant
period of time, the precise duration of which cannot be predicted. Accordingly, the adverse market and price pressures and constraint
on our ability to raise additional capital resulting from the shares registered hereunder may continue for an extended period of time.</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0.25in; margin: 0pt 0; text-align: justify"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Our Warrants are exercisable for Common
Stock, the exercise of which would increase the number of shares eligible for future resale in the public market and result in dilution
to our shareholders.</i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">As of December 16,
                                                                                                                   2024, there were 9,517,499 Common Warrants, 612,746 Series A Common Warrants and 8,175,166 Series C Warrants with an exercise price
                                                                                                                   ranging from $0.098 to $11.50 per share, which are exercisable into approximately 18,305,411 shares of Common Stock. To the extent
                                                                                                                   such warrants are exercised, additional shares of our Common Stock will be issued, which will result in dilution to the holders of
                                                                                                                   our Common Stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such
                                                                                                                   shares in the public market could adversely affect the market price of our Common Stock, the impact of which increases as the value
                                                                                                                   of our stock price increases.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Our Warrants may not be exercised at all
and we may not receive any cash proceeds from the exercise of the Warrants. </i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Holders of our Warrants will
be less likely to exercise their Warrants if the exercise prices of their Warrants exceed the market price of our Common Stock. There
is no guarantee that our Warrants will continue to be in the money prior to their expiration, and as such, the Warrants may expire worthless.
As such, any cash proceeds that we may receive in relation to the exercise of the Warrants overlying shares of Common Stock will be dependent
on the trading price of our Common Stock. There is no assurance that the holders of the Warrants will elect to exercise any or all of
such Warrants. As of the date of this prospectus (i) all of the Private Placement Warrants and Public Warrants, which have an exercise
price of $11.50 per share, (ii) all of the Rollover Warrants, which have an exercise price of $10.00 per share, and (iii) all of the Series
A Warrants, which have a current exercise price of $1.39 per share, are &#8220;out of the money,&#8221; meaning the exercise price is
higher than the market price of our Common Stock. Holders of such &#8220;out of the money&#8221; Warrants are not likely to exercise such
Warrants. There can be no assurance that such Warrants will be in the money prior to their respective expiration dates, and therefore,
we may not receive any cash proceeds from the exercise of such Warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b><i>Our Earnout Shares are accounted for as
liabilities and the changes in value of such shares could have a material effect on, or cause volatility in, our financial results. </i></b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We evaluated the accounting
treatment of our Earnout Shares (as defined below) subject to forfeiture if the applicable conditions to transferability thereof are not
satisfied and determined to classify such shares as liabilities measured at fair value. The fair value of such shares is remeasured on
a quarterly basis over the earn-out period with changes in the estimated fair value recorded in Other (expense) income on the condensed
consolidated statement of operations and comprehensive loss. Due to the recurring fair value measurement, we expect that we will recognize
non-cash gains or losses on our Earnout Shares each reporting period and that the amount of such gains or losses could materially impact
or cause volatility in our financial results.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_009"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>USE OF PROCEEDS</b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We estimate that we will receive net proceeds
of approximately $[____] million, after deducting the placement agent fees and estimated offering expenses payable by us (based on an
assumed public offering price of $[____] per share, which was the last reported sales price of our Common Stock on the Nasdaq Global Market
on [____], 2024) and assuming no sale of any Pre-Funded Warrants and no exercise of Offered Common Warrants. However, because this is
a best efforts offering with no minimum number of securities or amount of proceeds as a condition to closing, the actual offering amount,
placement agent fees and net proceeds to us are not presently determinable and may be substantially less than the maximum amounts set
forth on the cover page of this prospectus, and we may not sell all or any of the securities we are offering. As a result, we may receive
significantly less in net proceeds. Based on the assumed offering price set forth above, we estimate that our net proceeds from the sale
of 75%, 50% or 25% of the securities offered in this offering would be approximately $[____] million, $[____] million and $[____] million,
respectively, after deducting placement agent fees and estimated offering expenses payable by us.</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We currently intend to use the net proceeds from
this offering, together with our existing cash resources, toward the following activities in their order of importance:</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">advancement of our clinical programs; and</td>
</tr></table><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">fund working capital and other general corporate purposes.</td>
</tr></table><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">This expected use of net proceeds from this offering
represents our intentions based upon our current plans and business conditions. We have not determined the exact amounts we may spend
on any of the items listed above or the timing of these expenditures.</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our management will retain broad discretion over
the allocation of the net proceeds from this offering. We may find it necessary or advisable to use the net proceeds from this offering
for other purposes, and we will have broad discretion in the application of net proceeds. Although we may use a portion of the net proceeds
of this offering for the acquisition or licensing, as the case may be, of additional technologies, other assets or businesses, we have
no current understandings, agreements or commitments to do so.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0.25in; margin: 0pt 0; text-align: justify">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_010"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>MARKET PRICE AND DIVIDEND INFORMATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Market Price</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our Common Stock and Public
Warrants are listed on Nasdaq under the symbols &#8220;CERO&#8221; and &#8220;CEROW,&#8221; respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The closing price of our
Common Stock and our Public Warrants as reported on Nasdaq on December 18, 2024 was $0.06 per share and $0.009 per warrant.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b>Holders</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">As of December 18, 2024,
there were [133] holders of record of our Common Stock and [32] holders of record of our Public Warrants. The numbers of holders of record
do not include for example a substantially greater number of &#8220;street name&#8221; holders or beneficial holders whose securities
are held of record by banks, brokers and other financial institutions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0in; margin: 0pt 0; text-align: justify"><b>Dividend Policy</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We have not paid any cash
dividends to date. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements,
and general financial condition. The payment of any cash dividends will be within the discretion of our Board at such time.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.25in"><b>&#160;</b></p><div>

</div><div><a id="a_011"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.25in"><b>CAPITALIZATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table sets forth our cash and our
capitalization as of September 30, 2024, on:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
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</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">on an as adjusted basis, giving effect to the issuance and
sale of [__] shares of Common Stock in this offering at the assumed public offering price of $ per share, which is the last reported
sale price of our Common Stock on the Nasdaq Global Market on [___], 2024, and after deducting placement agent fees and estimated offering
expenses payable by us and assuming no sale of Pre-Funded Warrants in this offering and no exercise of Offered Common Warrants.</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">You should read this information in conjunction
with our consolidated financial statements and the related notes included elsewhere in this prospectus, the information set forth in &#8220;<i>Management&#8217;s
Discussion and Analysis of Financial Condition and Results of Operations</i>&#8221; and other financial information contained elsewhere
in this prospectus.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;&#160;</p><div>

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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">1,249,999</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">14,753</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in; text-align: left">Additional paid-in capital</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">66,363,448</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(2,073,607</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in; text-align: left">Accumulated deficit</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(71,589,745</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(3,702,425</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in; text-align: left">Total capitalization</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The
number of shares of Common Stock that will be outstanding after this offering is based on 147,542,572 shares of Common Stock outstanding
as of September 30, 2024, and excludes:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0in; margin-bottom: 0in; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2,657,486
shares of Common Stock underlying outstanding options;</span></td>
</tr></table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.25in">&#160;</td>
    <td style="text-align: justify; width: 0.25in; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify; font-size: 10pt">4,514,104 shares of Common Stock issuable under our 2016 Plan and our 2024 Plan,
which includes 4,514,104 shares of Common Stock reserved for issuance under our 2016 Plan and our 2024 Plan;</td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%">
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    <td style="text-align: justify; width: 0.25in">&#160;</td>
    <td style="text-align: justify; width: 0.25in; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">527,182 shares of Common Stock issuable under our 2024 ESPP, which includes 527,182 shares of Common Stock reserved for issuance under our 2024 ESPP;</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.25in">&#160;</td>
    <td style="text-align: justify; width: 0.25in; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify; font-size: 10pt">9,517,499 shares of Common Stock issuable upon the exercise of Public Warrants and
Private Placement Warrants;</td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.25in">&#160;</td>
    <td style="text-align: justify; width: 0.25in; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify; font-size: 10pt">8,787,912 shares of Common Stock issuable upon the exercise of Common Warrants issued
in the offerings of our Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock; and</td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%">
  <tr style="vertical-align: top">
    <td style="text-align: justify; width: 0.25in">&#160;</td>
    <td style="text-align: justify; width: 0.25in; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify; font-size: 10pt">117,286,607 shares of Common Stock issuable upon conversion of the Series A Preferred
Stock, Series B Preferred Stock, and Series C Preferred Stock, including 39,075,000 shares issuable upon the exercise of Preferred Warrants.</td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.25in"><b>&#160;</b></p><div>

</div><div><a id="a_012"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.25in"><b>DILUTION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If you invest in the Common
Stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the public offering
price per share of Common Stock, or Pre-Funded Warrants in lieu thereof, and accompanying Offered Common Warrants, and the as adjusted
net tangible book value per share of Common Stock immediately after this offering.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">As of September 30,
                                                                                                                   2024, our historical net negative tangible book value was $(3.7) million or $(0.024) per share of Common Stock. Historical net
                                                                                                                   tangible book value per share of Common Stock represents our total tangible assets less total liabilities, divided by the number of
                                                                                                                   shares of Common Stock outstanding as September 30, 2024.</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">

</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">After giving effect to the
receipt of the net proceeds from our sale of Common Stock in this offering at an assumed public offering price of $[__] per share of Common
Stock, assuming no sale of Pre-Funded Warrants in this offering and no exercise of Offered Common Warrants and after deducting placement
agent fees and estimated offering expenses payable by us, our as adjusted net tangible book value as of September 30, 2024, would have
been $[__] million per share of Common Stock. This represents an immediate increase in net tangible book value of $[__] per share of Common
Stock to our existing shareholders and immediate dilution of $[__] per share of Common Stock to investors purchasing Common Stock in this
offering.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">The following table illustrates this dilution
on a per share of Common Stock basis, assuming all shares of common stock outstanding as of September 30, 2024:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in; width: 76%">Assumed public offering price per share of Common Stock</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">&#160;&#160;&#160;&#160;&#160;&#160;</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"> [__]</span></td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.25in">Historical net tangible book value per share of Common Stock as of September 30, 2024</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"> (0.024</span></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in; text-align: left; padding-bottom: 1.5pt">Increase in net tangible book value per share of Common Stock attributed to investors purchasing Common Stock in this offering</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.125in; text-align: left; padding-bottom: 1.5pt">As adjusted net tangible book value per share of Common Stock after this offering</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.125in; text-align: left; padding-bottom: 4pt">Dilution in net tangible book value per share of Common Stock to investors in this offering</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt; text-align: right">&#160;</td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">[__]</td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td></tr>
  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">A $[__] increase or decrease
in the assumed public offering price of $[__] per share of Common Stock, based on the last reported sale price for our Common Stock as
reported on the Nasdaq Global Market on [__], 2024, would decrease the number of shares of our Common Stock offered in this offering by
approximately [__] million shares or increase the number of shares of our Common Stock offered in this offering by approximately [___]
million shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We may also increase or decrease
the number of shares of Common Stock we are offering. An increase of [___] in the number of shares of Common Stock offered by us would
increase our as adjusted net tangible book value by approximately $[__] million, or $[__] per share, and decrease the dilution per share
to investors participating in this offering by $[__] per share, assuming the assumed offering price per share remains the same and after
deducting the estimated placement agent commissions and estimated offering expenses payable by us. Similarly, a decrease of [____] in
the number of shares of Common Stock offered by us would decrease our as adjusted net tangible book value by approximately $[__] million
or $[__] per share, and increase the dilution per share to investors participating in this offering by $[__] per share, assuming the assumed
offering price per share remains the same and after deducting the estimated placement agent commissions and estimated offering expenses
payable by us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If we only sell 75%, 50%
or 25% of the maximum offering amount, our as adjusted net tangible book value per share after this offering would be $[__] million, $[__]
million or $[__] million, respectively, and the immediate dilution in net tangible book value per share to new investors purchasing securities
in this offering would be $[__], $[__] or $[__], respectively, assuming no Purchase Warrants or Pre-Funded Warrants are exercised, and
after deducting Placement Agent fees and estimated offering expenses payable by us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The dilution information
above is for illustration purposes only. Our as adjusted net tangible book value following the closing of this offering will depend on
the actual public offering price and other terms of this offering determined at pricing.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The number of shares of Common
Stock that will be outstanding after this offering is based on 147,542,572 shares of Common Stock outstanding as of September 30, 2024,
and excludes:</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-indent: 0.25in; margin: 0pt 0; text-align: justify">

</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
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    <td style="text-align: justify; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2,657,486 shares of Common Stock underlying outstanding options;</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify; font-size: 10pt">4,154,104 shares of Common Stock issuable under our 2016 Plan and our 2024 Plan,
which includes 4,154,104 shares of Common Stock reserved for issuance under our 2016 Plan and our 2024 Plan;</td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify; font-size: 10pt">9,517,499 shares of Common Stock issuable upon the exercise of Public Warrants and
Private Placement Warrants;</td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify; font-size: 10pt">8,787,912 shares of Common Stock issuable upon the exercise of Common Warrants issued
in the offerings of our Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock; and</td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; font-size: 10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify; font-size: 10pt">117,286,607 shares of Common Stock issuable upon conversion of the Series A Preferred
Stock, Series B Preferred Stock, and Series C Preferred Stock, including 39,075,000 shares issuable upon the exercise of Preferred Warrants.</td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">To the extent any outstanding
options are exercised, new options or other equity awards are issued under our equity incentive plans, or we issue additional equity or
convertible securities in the future, there will be further dilution to new investors participating in this offering.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_013"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">PBAX, and after the Business
Combination, CERo, is providing the following unaudited pro forma condensed combined financial information to aid you in your analysis
of the financial aspects of the Business Combination and related transactions. The following unaudited pro forma condensed financial information
presents the combination of the financial information of PBAX and Legacy CERo adjusted to give effect to the Business Combination and
related transactions. The following unaudited pro forma condensed combined financial information has been prepared in accordance with
Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 &#8220;Amendments to Financial Disclosures about Acquired
and Disposed Businesses.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The historical financial
information of PBAX was derived from the audited financial statements of PBAX for the year ended December 31, 2023. The historical financial
information of Legacy CERo was derived from audited financial statements of Legacy CERo for the year ended December 31, 2023. Such unaudited
pro forma financial information has been prepared on a basis consistent with the audited financial statements of PBAX and Legacy CERo,
respectively, and should be read in conjunction with the audited historical financial statements and related notes.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The unaudited pro forma condensed
combined balance sheet as of December 31, 2023, combines the historical balance sheet of PBAX and the historical balance sheet of Legacy
CERo on a pro forma basis as if the Business Combination and the related transactions contemplated by the Business Combination Agreement,
summarized below, had been consummated on December 31, 2023. The unaudited pro forma condensed combined statement of operations for the
year ended December 31, 2023 combines the historical statement of operations of PBAX and historical statement of operations of Legacy
CERo on a pro forma basis as if the Business Combination and the transactions contemplated by the Business Combination Agreement, summarized
below, had been consummated on January 1, 2023. There were no pro forma adjustments required to eliminate activities between the companies.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">These unaudited pro forma
condensed combined financial statements are for informational purposes only. They do not purport to indicate the results that would have
been obtained had the Business Combination and related transactions actually been completed on the assumed date or for the period presented,
or which may be realized in the future. The pro forma adjustments are based on the information currently available and the assumptions
and estimates underlying the pro forma adjustments are described in the accompanying notes. Actual results may differ materially from
the assumptions within the accompanying unaudited pro forma condensed combined financial information.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On June 6, 2023, PBAX entered
into a Business Combination Agreement with Merger Sub and Legacy CERo, pursuant to which Merger Sub merged with and into Legacy CERo,
with Legacy CERo surviving as a wholly-owned subsidiary of the CERo. The Business Combination Agreement was amended on February 5, 2024
and again on February 13, 2024. The Business Combination closed on February 14, 2024, at which time the following occurred:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1.</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Each outstanding share of Legacy CERo&#8217;s convertible preferred stock (the &#8220;CERo preferred stock&#8221;) was converted into the number of shares of PBAX&#8217;s Class A common stock, par value $0.0001 per share (the &#8220;Class A Common Stock&#8221;), calculated by dividing the liquidation preference by $10.00.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2.</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Each outstanding share of Legacy CERo&#8217;s common stock (the &#8220;CERo common stock&#8221;) was converted into the number of shares of Class A Common Stock calculated by multiplying each share by the exchange ratio (the &#8220;Exchange Ratio&#8221;). The Exchange Ratio of 0.064452 was calculated by first subtracting the aggregate liquidation preference of outstanding preferred shares from $50 million, then dividing the result by the number of shares of CERo common stock outstanding and dividing by $10.00 per share.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">3.</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Each holder of Legacy CERo common stock received a pro rata portion of up to 1.2 million earnout shares of Class A Common Stock, 1,000,000 of which are subject to vesting upon the achievement of certain stock price-based earnout targets and 200,000 of which are subject to vesting upon a change of control, respectively.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Certain holders of Legacy CERo common stock received a pro rata portion of 875,000 earnout shares of Class A Common Stock, which became fully vested upon the closing of the Business Combination.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">5.</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Certain holders of the Legacy CERo&#8217;s common stock received a pro rata portion of up to 1.0 million earnout shares of Class A Common Stock, which are subject to vesting upon the Company&#8217;s filing an investigational new drug application with the FDA.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">6.</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Each outstanding Legacy CERo option was converted into an option to purchase a number of shares of Class A Common Stock, equal to the shares of Legacy CERo common stock underlying the option multiplied by the Exchange Ratio, at an exercise price per share equal to the Legacy CERo option exercise price divided by the Exchange Ratio.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">7.</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Each Legacy CERo warrant was converted into a warrant to acquire a number of shares of Class A Common Stock obtained by dividing the warrant as-if-exercised liquidation preference by $10.00, with the exercise price equal to the total Legacy CERo warrant exercise amount divided by the number of shares of Common Stock issuable upon exercise.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">8.</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The Convertible Bridge Notes automatically converted into shares of Series A Preferred Stock, at a conversion price equal to $750 per share.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">CERo issued, transferred
from the Sponsor, or reserved for issuance an aggregate of 8.4 million shares of Class A Common Stock to the holders of Legacy CERo common
stock and Legacy CERo preferred stock or reserved for issuance upon exercise of Legacy CERo options or warrants as consideration in the
Business Combination. In connection with the Business Combination, PBAX changed its name to &#8220;CERo Therapeutics Holdings, Inc.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The unaudited pro forma condensed
combined financial information has been prepared using the assumptions below:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On June 4, 2023, Legacy CERo
entered into a bridge financing agreement (the &#8220;Bridge Financing&#8221;) in anticipation of Legacy CERo completing the Business
Combination with PBAX pursuant to a definitive Business Combination Agreement. On June 6, 2023, Legacy CERo sold the Convertible Bridge
Notes with an aggregate principal amount of $605,230 to certain eligible participants. The Convertible Bridge Notes were automatically
converted (principal and accrued interest) upon the Business Combination into an aggregate of 628 shares of Series A Preferred Stock at
conversion rate of $1,000 per share, and all of the Convertible Bridge Notes were retired.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">An additional 1,000,000 shares
of restricted Common Stock were issued to select Legacy CERo stockholders and Convertible Bridge Note investors and a corresponding 1,000,000
shares of Common Stock held by the Sponsor have been restricted. Upon the filing of an investigational new drug (&#8220;IND&#8221;) application
with the FDA, the restrictions upon the shares of Common Stock issued to such Legacy CERo stockholders and Convertible Bridge Note investors
will be removed, and the shares of Common Stock held by the Sponsor will be retired. Should CERo fail to file an IND with the FDA, the
shares of Common Stock issued to such Legacy CERo stockholders and Convertible Bridge Note investors will be retired and the restrictions
on the Sponsor&#8217;s Common Stock will be removed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Of the 2,000,000 shares of
Common Stock held by Sponsor, 250,000 shares were transferred to a key investor, 875,000 shares were distributed to select Legacy CERo
stockholders and Convertible Bridge Note investors as earnout shares, and 875,000 shares being retained by the Sponsor.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">CERo also issued 1,943,550
new shares of Common Stock in connection with the Business Combination, consisting of (i) 1,649,500 shares issued to select vendors in
lieu of cash payment for services provided related to the Business Combination, (ii) 175,000 shares provided to individuals as compensation
and (iii) 119,050 shares issued to Keystone as consideration for its entry into the Keystone Equity Financing.</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Additionally, in February
2024, CERo consummated a private placement of 10,039 shares of Series A Preferred Stock, warrants to purchase 612,746 shares of Series
A Warrants and warrants to purchase 2,500 shares of Preferred Warrants, pursuant to the Amended and Restated Securities Purchase Agreement,
dated February 14, 2024, by and among PBAX, Legacy CERo and certain accredited investors (the &#8220;Initial Investors&#8221;) for aggregate
cash proceeds to CERo of approximately $8.0 million, plus additional cash proceeds of $2.0 million on the mandatory exercise of the Preferred
Warrants on the registration of the underlying common shares. A portion of such Series A Preferred Stock was issued as consideration for
the cancellation of outstanding indebtedness or securities of PBAX or Legacy CERo, including a promissory note of PBAX and the Convertible
Bridge Notes.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, CERo entered
into a side letter with Keystone, pursuant to which CERo agreed to make a payment of $1.0 million to Keystone, which amount reflects an
original issue discount to Keystone, and to reimburse $150,000 of legal expenses incurred thereby. In addition, the Sponsor agreed to
transfer an aggregate of 250,000 shares of Class A Common Stock to another investor as consideration for their participation in the PIPE
Financing.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On February 14, 2024, as
a condition to the closing of the PIPE Financing, CERo entered into the Old Keystone Purchase Agreement with Keystone, pursuant to which
CERo may sell and issue, and Keystone is obligated to purchase, up to the lesser of $25 million of Common Stock or a limit determined
by maximum ownership percentages (the &#8220;Keystone Equity Financing&#8221;). On February 23, 2024, CERo entered into Arena Purchase
Agreement, pursuant to which CERo may sell and issue, subsequent to the Keystone Equity Financing being terminated or fully subscribed,
and Arena is obligated to purchase, up to $25 million of Common Stock or a limit determined by maximum ownership percentages (the &#8220;Arena
Equity Financing&#8221;). Each of the Keystone Equity Financing and Arena Equity Financing is in place, but there was no accounting impact
on the date of the transaction.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The following summarizes
the pro forma ownership of Common Stock following the Business Combination</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Shares</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">%</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Public shares<sup>(1)</sup></span></td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">82,047</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">0.6</td><td style="width: 1%; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Common shares issued to Legacy CERo stockholders<sup>(2)</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">8,075,000</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">54.8</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Non-Sponsor held private shares<sup>(3)</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">2,378,554</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">23.0</td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Shares held by Sponsor</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">4,171,246</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">21.6</td><td style="padding-bottom: 1.5pt; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt">Shares outstanding</td><td style="padding-bottom: 4pt">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Excludes Legacy CERo warrants, which were converted into warrants to purchase approximately 325,000 shares of Common Stock.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Excludes 750,000 options granted under Legacy CERo&#8217;s 2016 Equity Incentive Plan, which were converted into options to purchase 48,399 shares of Class A Common Stock.</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(3)</span></td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Business Combination
is being accounted for using the asset acquisition method in accordance with accounting principles generally accepted in the United States
of America (&#8220;U.S. GAAP&#8221;). Under this method of accounting, we have determined that PBAX is the accounting acquirer as PBAX
is (i) the entity issuing its own shares to consummate the Business Combination, (ii) the senior management team will primarily be comprised
of PBAX&#8217;s existing management team, and (iii) PBAX&#8217;s assets were significantly larger than Legacy CERo&#8217;s, based on the
terms of the Business Combination Agreement. The merger is being accounted for as an asset acquisition as substantially all of the fair
value is concentrated within in-process research and development (&#8220;IPR&amp;D&#8221;), an intangible asset. Legacy CERo&#8217;s assets
(except for cash) and liabilities will be measured and recognized as an allocation of the transaction price based on their relative fair
values as of the transaction date with any value associated with IPR&amp;D with no alternative future use being expensed.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>


</div><!-- Field: Page; Sequence: 90; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->76<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE
SHEET </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>AS OF DECEMBER 31, 2023</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b><i>(In thousands)</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(27,636</td><td style="text-align: left">)</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">(599,692</td><td style="text-align: left">)</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">23,633</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">1,555,000</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(1,555,000</td><td style="text-align: left">)</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">56,389</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><sup>&#160;</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">3,315</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">320,117</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#8212;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#8212;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">5,173,421</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">3,507,154</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">8,481,607</td><td style="text-align: left">&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><sup>&#160;</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">17,162,182</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,575,499</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">1,575,499</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">2,096</td><td style="text-align: left">&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">2,096,709</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">51,502</td><td style="text-align: left">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#8212;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><sup>&#160;</sup></span></td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><sup>&#160;</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><sup>&#160;</sup></span></td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">7,677,291</td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,503,498</td><td style="text-align: left">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><sup>&#160;</sup></span></td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><sup>&#160;</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">907</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(907</td><td style="text-align: left">)</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><sup>D</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#8212;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">82</td><td style="text-align: left">&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><sup>E</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">61</td><td style="text-align: left">&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><sup>F</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">20</td><td style="text-align: left">&#160;</td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><sup>H</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">12</td><td style="text-align: left">&#160;</td>
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    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><sup>A</sup></span></td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><sup>E</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>UNAUDITED PRO FORMA CONDENSED COMBINED</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>DETAILED ADJUSTED STATEMENT OF OPERATIONS </b></p><div>

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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(94,819</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right">&#160;</td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(0.39</td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 4pt">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>


</div><!-- Field: Page; Sequence: 92; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->78<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Note 1. Basis of Presentation</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Business Combination
is being accounted for as an asset acquisition in accordance with U.S. GAAP. Under this method of accounting, PBAX will be treated as
the &#8220;accounting acquirer&#8221; and Legacy CERo as the &#8220;accounting acquiree&#8221; for financial reporting purposes. Accordingly,
for accounting purposes, the Business Combination is being accounted for as an asset acquisition as substantially all of the fair value
is concentrated in IPR&amp;D, an intangible asset. Legacy CERo&#8217;s assets (except for cash) and liabilities will be measured and recognized
as an allocation of the transaction price based on their relative fair values as of the transaction date with any value associated with
IPR&amp;D with no alternative future use being expensed. The fair value measurements utilize estimates based on key assumptions of the
Business Combination, including historical and current market data.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The unaudited pro forma adjustments
included herein are preliminary and will be adjusted as additional information becomes available and as additional analyses are performed.
The final purchase price allocation will be determined subsequent to the Merger, and the final amounts of the assets acquired, and liabilities
assumed may differ materially from the values recorded in the pro forma financial information.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The unaudited pro forma condensed
combined balance sheet as of December 31, 2023, gives effect to the Business Combination and related transactions as if they had been
completed on December 31, 2023. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2023,
gives effect to the Business Combination and related transactions as if they had been completed on January 1, 2023. These periods are
presented on the basis that PBAX is the acquirer for accounting purposes.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The pro forma adjustments
reflecting the consummation of the Business Combination and the related transaction are based on certain currently available information
and certain assumptions and methodologies that PBAX management believes are reasonable under the circumstances. The unaudited condensed
combined pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available
and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments, and it is possible that
the differences may be material. PBAX management believes that its assumptions and methodologies provide a reasonable basis for presenting
all of the significant effects of the Business Combination and the related transactions based on information available to management at
this time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro
forma condensed combined financial information.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The unaudited pro forma condensed
combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings, or cost savings
that may be associated with the Business Combination. The unaudited pro forma condensed combined financial information is not necessarily
indicative of what the actual results of operations and financial position would have been had the Business Combination and related transactions
taken place on the dates indicated, nor are they indicative of the future results of operations or financial position of the post-combination
company. They should be read in conjunction with the historical financial statements and notes thereto of PBAX and Legacy CERo.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Note 2. Accounting Policies and Reclassifications</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">After consummation of the
Business Combination, management will perform a comprehensive review of the two entities&#8217; accounting policies. As a result of the
review, management may identify differences between the accounting policies of the two entities which, when conformed, could have a material
impact on the financial statements of the post-combination company. Based on its initial analysis, management did not identify any differences
that would have a material impact on the unaudited pro forma condensed combined financial information. As a result, the unaudited pro
forma condensed combined financial information does not assume any differences in accounting policies.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"></p><div>

</div><!-- Field: Page; Sequence: 93; Value: 1 --><div>
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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt -0.25in; text-indent: 0.25in"><b>Note 3. Preliminary Purchase Price</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">The accompanying unaudited pro forma condensed
combined financial statements reflect an estimated preliminary purchase price of approximately $45,718,778 comprised of equity consideration
of approximately $39,567,500, and PBAX estimated transaction costs of $6,151,278.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">The table below represents the total estimated
preliminary purchase price:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 88%; text-align: left; text-indent: -9pt; padding-left: 9pt">Total shares transferred (Legacy CERo Shareholders on a fully- diluted basis exclusive of Preferred Shareholders)</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">584,505</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">2,864,074</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -10pt; padding-left: 0.25in">Series Seed liquidation value</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">415,498</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -10pt; padding-left: 0.25in">Series A liquidation amount</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">3,999,997</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">4,415,495</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">21,635,926</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>Reallocation Shares</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Reallocation shares</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">875,000</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right">4.90</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">4,287,500</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Additional earnout and reallocation shares</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">1,200,000</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">1,000,000</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -10pt; padding-left: 10.25pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">2,200,000</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right">4.90</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 1.5pt; text-indent: -10pt; padding-left: 10.25pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right">10,780,000</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; padding-bottom: 1.5pt; text-indent: -10pt; padding-left: 10.25pt">Total Share Consideration</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">39,567,500</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -10pt; padding-left: 10.25pt">Transaction costs</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right">6,151,278</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left; padding-bottom: 4pt; text-indent: -10pt; padding-left: 10.25pt">Total purchase consideration</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">45,718,778</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Share consideration is calculated using a $4.90 reference price, which was the February 15, 2024 closing price of CERo Therapeutics Holdings, Inc. on the first full day of trading.&#160;</span></td></tr>
  </table><div>
</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">For purposes of this pro
forma analysis, the above estimated purchase price has been allocated based on the relative fair value of the preliminary estimate of
the fair value of assets and liabilities to be acquired:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: bottom">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Preliminary Purchase Price Allocation:</b></span></td>
    <td>&#160;</td>
    <td colspan="2">&#160;</td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td style="width: 88%; padding-left: 10.25pt; text-indent: -10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In-process research and development</span></td>
    <td style="width: 1%">&#160;</td>
    <td style="width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</span></td>
    <td style="width: 9%; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">45,101,193</span></td>
    <td style="width: 1%">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="padding-left: 10.25pt; text-indent: -10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Long-term assets</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">3,156,267</span></td>
    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td style="padding-left: 10.25pt; text-indent: -10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Net working capital (Excluding cash)</span></td>
    <td>&#160;</td>
    <td style="border-bottom: black 1.5pt solid">&#160;</td>
    <td style="border-bottom: black 1.5pt solid; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2,538,682</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td></tr>
  <tr style="vertical-align: bottom">
    <td style="padding-left: 10.25pt; text-indent: -10pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Net assets acquired</b></span></td>
    <td>&#160;</td>
    <td style="border-bottom: black 4.5pt double"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>$</b></span></td>
    <td style="border-bottom: black 4.5pt double; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>45,718,778</b></span></td>
    <td>&#160;</td></tr>
  </table><div>
</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The guidance in ASC 805 requires
an initial screen test to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single asset
or group of similar assets. If that screen is met, the set is not a business. The initial screen test was met as PBAX determined that
substantially all of the fair value was concentrated in the acquired IPR&amp;D. The fair value of the IPR&amp;D was determined to be approximately
$61 million before the purchase price was allocated among the assets and liabilities acquired, as shown above.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">IPR&amp;D represents the
R&amp;D assets of Legacy CERo which were in-process, but not yet completed, and which PBAX has the opportunity to advance. Current accounting
standards require that the fair value of IPR&amp;D projects acquired in an asset acquisition with no alternative future use be allocated
a portion of the consideration transferred and charged to expense at the acquisition date.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><!-- Field: Split-Segment; Name: 1 --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>


</div><!-- Field: Page; Sequence: 94; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->80<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Note 4. Adjustments to Unaudited Pro Forma Condensed Combined
Financial Information</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The unaudited pro forma condensed
combined financial information has been prepared to illustrate the effect of the Business Combination and related transactions and has
been prepared for informational purposes only.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The following unaudited pro
forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final
rule, Release No. 33-10786 &#8220;Amendments to Financial Disclosures about Acquired and Disposed Businesses.&#8221; Release No. 33-10786
replaces the existing pro forma adjustment criteria with simplified requirements to depict the accounting for the transaction (&#8220;Transaction
Accounting Adjustments&#8221;) and present the reasonably estimable synergies and other transaction effects that have occurred or are
reasonably expected to occur (&#8220;Management&#8217;s Adjustments&#8221;). The pro forma adjustments reflecting the consummation of
the Business Combination and related transactions are based on certain currently available information and certain estimates, assumptions
and methodologies that management believes are reasonable under the circumstances. The unaudited condensed combined pro forma adjustments,
which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. PBAX has elected
not to present Management&#8217;s Adjustments and will only be presenting Transaction Accounting Adjustments in the unaudited pro forma
condensed combined financial information. There were no pro forma adjustments required to eliminate activities between the companies.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The unaudited pro forma condensed
combined financial information does not include an income tax adjustment. Upon closing of the Business Combination, it is likely that
the combined company will record a valuation allowance against the total U.S. and state deferred tax assets as the recoverability of the
tax assets is uncertain. The pro forma combined provision for income taxes does not necessarily reflect the amounts that would have resulted
had the combined company filed consolidated income tax returns during the period presented.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The pro forma basic and diluted
earnings per share amounts presented in the unaudited pro forma condensed combined statement of operations are based upon the number of
shares of Common Stock outstanding, assuming the Business Combination and related transactions occurred on the beginning of the earliest
period presented.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Adjustments to Unaudited Pro Forma Condensed Consolidated Combined
Balance Sheet:</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The adjustments included
in the unaudited pro forma condensed combined balance sheet as of December 31, 2023 are as follows:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">A.</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Reflects
the redemption of 671,285 PBAX shares for $7,524,954, reflecting a redemption price of $11.11 per share.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">B.</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Reflects
the reclassification of PBAX&#8217;s remaining 82,047 shares from redeemable to permanent equity and reclassification of the remaining
$911,357 from the restricted cash held in trust to cash.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">C.</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Reflects
the automatic conversion of $605,230 of principal and $27,636 of accrued interest into 631 shares of Series A Preferred Stock based on
the final terms of the Bridge Financing. This adjustment includes a $5,538 adjustment to retained earnings to reflect the amortization
of the remaining debt discount and $2,096 of derivative liabilities associated with the Preferred A conversion features.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">D.</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Reflects
the elimination of Legacy CERo&#8217;s outstanding equity, exclusive of its preferred shares which is adjusted in (E), comprised of 9,068,899
shares of common stock, par value of $0.0001, accumulated deficit of $43,089,821, and a $43,088,914 decrease in additional paid-in capital.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in"></p><div>

</div><!-- Field: Page; Sequence: 95; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->81<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">E.</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Reflects
the Merger Consideration (as defined in the Business Combination Agreement), including the estimated fair value of shares of Class A
Common Stock to existing Legacy CERo common stock shareholders, estimated fair value of 4,415,494 shares of Class A Common Stock to existing
convertible preferred shareholders (Note 3), estimated fair value of 875,000 shares of Class A Common Stock to existing shareholders
for reallocation shares, estimated fair value of 2,200,000 shares of Class A Common Stock to existing shareholders for earnout and reallocation
shares, and estimated transaction costs. Also reflects the elimination of Legacy CERo&#8217;s Series Seed preferred stock and Series
A preferred stock at $4,077,560 and $38,023,784, respectively, an increase in additional paid-in capital of $87,819,313, as well as the
adjustment to accumulated deficit for the acquired IPR&amp;D as follows:</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">December&#160;31, <br/> 2023</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 88%; text-align: left; text-indent: -10pt; padding-left: 10.25pt">Expensed IPR&amp;D acquired (DD)</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">45,101,193</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -10pt; padding-left: 10.25pt">Long-term assets</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">3,156,267</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -10pt; padding-left: 10.25pt">Net working capital (exclusive of cash and cash equivalents)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(2,538,682</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left; padding-bottom: 4pt; text-indent: -10pt; padding-left: 10.25pt">Total adjustments to accumulated deficit</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right">45,718,778</td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F.</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Reclassification
of the estimated fair value of the 2,200,000 earn-out shares from equity to short term liability as the shares are restricted until the
trigger events occur. CERo estimates that the trigger events are likely to occur within the year 2024.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">G.</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Represents
Legacy CERo&#8217;s estimated transaction costs of $7.6 million, inclusive of advisory, banking, legal and other professional fees that
are expensed as a part of the Business Combination, $3.8 million of which has already been reflected within the historical financial
statements of Legacy CERo and $1.5 million of which has already been paid. PBAX recorded an additional $3.8 million additional fees related
to the transaction. PBAX negotiated Fee Modification Agreements with vendors resulting in a gain on settlement of expenses of $1.3 million
and payment in equity with a fair value of $3.0 million. PBAX paid $1.2 million in cash and has deferred the remaining amounts owed.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">H.</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Repayment
of PBAX working capital loan &#8212; related party. The working capital loan was converted into shares of Series A Preferred Stock at
a price of $10.00 per share, resulting in an additional issuance of 1,555 Common Stock.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">I.</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Represents
the settlement of PBAX&#8217;s deferred underwriting fees related to its Initial Public Offering, resulting in a reduction of $5,570,000
of deferred underwriting fees owed in exchange for a $250,000 cash payment, issuance of 200,000 shares of Common Stock and further deferral
of $2.5 million. This resulted in a gain on the settlement of deferred underwriting fees and associated reduction in retained deficit
of $4.3 million.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">J.</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">In
February 2024, CERo consummated a private placement of 10,039 shares of Series A Preferred Stock, 612,746 Series A Warrants and 2,500
Preferred Warrants pursuant to the First Securities Purchase Agreement for aggregate cash proceeds to CERo of approximately $8.0 million,
plus additional cash proceeds of $2.0 million on the mandatory exercise of the Preferred Warrants upon the registration of the underlying
shares of Common Stock. A portion of such Series A Preferred Stock was issued as consideration for the cancellation of outstanding indebtedness
or securities of the Company, including a promissory note of PBAX and CERo&#8217;s convertible notes. Certain conversion features with
an estimated fair value of $315,799 and warrants to purchase 612,746 common shares for $9.20 per share granted to certain investors with
a preliminary estimated fair value of $1,727,312 are presented as derivative liabilities. Net cash proceeds was $7.6 million for purchased
shares and warrants, which resulted in $2.1 million being recorded as a warrant liability and $5.5 million recorded as Series A Preferred
stock.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">K.</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
part of the PIPE Financing, CERo sold 2,500 Preferred Warrants to certain investors for an aggregate of $2.0 million. Once the underlying
shares of common stock are registered, such investors must exercise such Preferred Warrants upon written notice of CERo.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">L.</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">As
consideration for the establishment of the Keystone Equity Financing to sell up to the lesser of 2,977,070 shares of newly issued shares
of Common Stock and (ii) the Exchange Cap of 19.99% ownership of the outstanding common stock of the Company, unless shareholders approve
a higher quantity, CERo issued 119,050 common shares with a value of $486,915 on February 15, 2024, the first full day of trading of
the combined entity. Another $250,000 of shares of Common Stock will be issued at 90 and 180 days after the effectiveness of a registration
statement filed by CERo to register such shares.</span></td>
</tr></table><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

</div><p style="margin-top: 0; margin-bottom: 0"></p><div>

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</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Adjustments to Unaudited Pro Forma Condensed Combined
Statement of Operations</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The pro forma adjustments
included in the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2023, are as follows:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">AA.</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Reflects
Legacy CERo&#8217;s and PBAX&#8217;s additional $3.8 million of transaction costs incurred after December 31, 2023.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">BB.</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Reflects
the recognition of expense associated with the fair value of the 119,050 shares of common stock paid in association with the arrangement
of the $25 million Keystone Equity Financing.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">CC.</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Reflects
the $4.3 million gain on settlement of transaction expenses and deferred underwriting fees.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">DD.</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Reflects
the amortization of the remaining debt discount related to the Convertible Bridge Notes.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">EE.</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Reflects
the expensing of the $45.1 million of acquired Legacy CERo in-process research and development</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Note 5. Net Loss per Share</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Net loss per share was calculated
using the historical weighted average shares outstanding, and the issuance of additional shares in connection with the Business Combination
and the related transactions, assuming the shares were outstanding since January 1, 2023. As the Business Combination and the related
transactions are being reflected as if they had occurred at the beginning of the period presented, the calculation of weighted average
shares outstanding for basic and diluted net loss per share assumes that the shares issuable relating to the Business Combination and
related have been outstanding for the entirety of the period presented.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The following has been prepared
to present the net loss per share at the time of the Business Combination for the year ended December 31, 2023:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 88%; text-align: left; text-indent: -10pt; padding-left: 10.25pt">Pro forma net loss</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">(54,910,374</td><td style="width: 1%; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -10pt; padding-left: 10.25pt">Weighted average shares outstanding &#8211; basic and diluted</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">14,706,847</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -10pt; padding-left: 10.25pt">Net loss per share &#8211; basic and diluted</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">(3.73</td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-style: italic; text-align: left; text-indent: -10pt; padding-left: 10.25pt">Excluded securities</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -10pt; padding-left: 10.25pt">Private Placement Warrants</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">442,500</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -10pt; padding-left: 10.25pt">Public Warrants</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">8,750,000</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -10pt; padding-left: 10.25pt">Investor warrants</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">612,746</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -10pt; padding-left: 10.25pt">Legacy CERo warrants</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">324,999</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -10pt; padding-left: 10.25pt">Legacy CERo options</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">48,339</td><td style="text-align: left">&#160;</td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_014"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BUSINESS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-variant: small-caps"><b>&#160;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We are an innovative immunotherapy
company advancing the development of next-generation engineered T cell therapeutics for the treatment of cancer. Our proprietary approach
to T cell engineering, which enables us to integrate certain desirable characteristics of both innate and adaptive immunity into a single
therapeutic construct, is designed to engage the body&#8217;s full immune repertoire to achieve optimized cancer therapy. Our novel cellular
immunotherapy platform is designed to redirect patient-derived T cells to eliminate tumors by building in pathways that employ both cytotoxic
and phagocytic mechanisms to destroy cancer cells, creating what we refer to as CER-T cells. Our lead molecule is CER-1236, an autologous
T-cell product that targets a novel tumor antigen, TIM-4 ligand. Unlike currently approved chimeric antigen receptor (&#8220;CAR-T&#8221;)
therapies which have largely been active in hematological B cell malignancies, we believe CER-1236 will be efficacious in both hematological
malignancies and solid tumors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On November 14, 2024, the
company received notice from the FDA that the IND was cleared after being put on a brief clinical hold due to insufficient nonclinical
data to adequately judge off target toxicity. The clinical hold was lifted after additional in vitro experiments were performed which
allayed the agency&#8217;s concerns.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The ability to enhance the
activity of T cells against human cancers through genetic engineering has been among the most significant advances in cancer therapy in
the last decade. One of the more promising therapeutic uses of T&#160;cells to emerge has been CAR-T cell technology. However promising
CAR-T cell therapy has been, its use has been largely limited to the treatment of certain hematological cancers due to lack of specific
tumor-associated antigens and CAR-T cells&#8217; limited ability to proliferate, traffic, and circulate in solid tumors. Curative cell
therapies for solid tumors currently do not exist, and the significance of this limitation is underscored by the prevalence of solid tumor
malignancies. The American Cancer Society estimates that solid tumor cancers accounted for more than 1.7&#160;million of the 1.9&#160;million
people newly diagnosed with cancer in 2022. Even in hematological malignancies with approved CAR-T cell therapies, cure rates do not exceed
60%. Nevertheless, despite such limitations, sales of CAR-T cell therapies are anticipated to grow rapidly over the next several&#160;years
and are expected to exceed $10&#160;billion globally by 2030.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We believe that the preferential
attributes engineered into our CER-T cell therapy enables us to overcome many of the limitations which hinder the wider application of
CAR-T technology. Our CER-T cells employ a novel targeting mechanism that targets a ligand broadly expressed on tumor cells but not healthy
cells. Specifically, CER-1236 targets the TIM-4 Ligand (TIM-4-L), otherwise known as phosphatidylserine (&#8220;PS&#8221;), a critical
component of the cell&#8217;s plasma membrane that has a key role in cell cycle regulation. Exposure of TIM-4-L on the outer surface of
the plasma membrane acts as an &#8220;eat-me&#8221; signal and marks abnormal, stressed and dying or dead cells for phagocytosis. The
pro-phagocytic activities of CER-T cells are designed to integrate innate immune effector functions into cytotoxic killer T cells, creating
within a single T cell the ability to directly mediate cytotoxic effects and indirectly prime other immune cells. Moreover, in preclinical
studies, we have observed that CER-1236 cells exhibit superior cross-presentation abilities compared to conventional T cells, potentially
triggering a broad complement of immune effector cells against tumors. Since externally oriented TIM-4-L is ubiquitously expressed by
numerous cancer cell types but has very limited exposure on normal healthy cells, we envision CER-1236 as having differentiated therapeutic
utility with application across a wide array of cancer types.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We have patterned the design
of our CER-T constructs based upon many of the components found in existing conventional CAR-T cell therapies, which we believe could
shorten development timelines and enhance commercial application. The processes and protocols used to genetically modify a patient&#8217;s
T cells to produce CAR-T cells are already well recognized, as is the use of lentivirus in the manufacture of these therapies. Accordingly,
we have developed CER-T cell manufacturing processes that closely resemble those used to produce existing engineered CAR-T cells. We also
expect to benefit from the well-defined and recognized regulatory guidelines established by both U.S.&#160;and European regulatory authorities
related to CAR-T therapies and their use. In contrast to these attributes, we believe that other emerging CAR-based drug candidates which
involve immune effector cells other than T cells, such as CAR-NK and CAR-M therapies, are unlikely to enjoy similar benefits.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In preclinical studies, we
have observed CER-1236 to display attractive functional attributes, among which are:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">target-dependent
activation, cytotoxicity, anti-tumor cytokine production, and high proliferative capacity;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">phagocytosis
of tumor cells;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">distinct
transcriptome, cytokine and chemokine signatures that substantiate the complementary activity of both the innate and adaptive immune
response;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">enhanced
antigen acquisition, processing and presentation;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">no
evidence of T cell exhaustion despite repeated challenges;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">no
observed off-target or off-tumor toxicities;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">expression
and maintenance of diverse T cell populations, including na&#239;ve and memory cells, likely indicative of response persistence and durability;
and</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">well
defined and scalable manufacturing protocols.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Based on the preclinical
data regarding the use of CER-1236 T cells to combat hematologic malignancies, we anticipate beginning clinical trials in the first half
of 2025. We anticipate that our initial targets will be relapsed, remitting acute myeloid leukemia (&#8220;AML&#8221;) patients as well
as AML patients with measurable residual disease (&#8220;MRD&#8221;) and patients with mutations in TP53, a gene mutation associated with
aggressive AML. AML is a heterogenous and aggressive hematopoietic malignancy characterized by the rapid buildup of immature myeloid cells
in the bone marrow and blood. This process results in the inhibition of normal haematopoiesis, manifesting as neutropenia, anemia, thrombocytopenia,
and the clinical features of bone marrow failure. AML accounts for 90% of all acute leukemias in adults, with an estimated 20,240 new
cases and 11,400 deaths expected in the United States in 2023. The current treatment has remained largely unchanged over several decades
with combination chemotherapy with cytarabine for 7 days and an anthracycline for 3 days (&#8220;7+3&#8221;). Newer, targeted approaches
that include multi-kinase domain inhibitors and antibody-drug conjugates are now available during induction chemotherapy for certain patients.
For patients that are sufficiently healthy and at unfavorable risk, allogeneic Hematopoietic Stem Cell Transplants (&#8220;HSCTs&#8221;)
are commonly performed. Despite these interventions, there is significant unmet medical need for novel therapies, including cell therapeutic
approaches</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our Phase&#160;1 AML clinical
trial is intended to evaluate the safety, potential therapeutic utility and applicable dose of CER-1236. The approved starting dose for
the clinical trial is sufficiently high that we expect begin to see efficacy by the second dose level cohort. Concurrent with a trial
in these hematological malignancies, we intend to expand the clinical development of CER-1236 with an additional IND submission to investigate
solid tumors such as non-small cell lung cancer (&#8220;NSCLC&#8221;) and ovarian cancer. We believe that CER-1236 has the potential to
address unmet medical needs in the targeted indications, and be differentiated from currently available therapeutics by its safety, tolerability
and efficacy. Since no clinical trials of CER-1236 have commenced, none of the abovementioned statements regarding any of our products
in development are intended to be a prediction or conclusion of efficacy.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Our Strategy</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our intent is to become a
leading biopharmaceutical company focused on the capital-efficient advancement of innovative anti-cancer product candidates targeting
the unmet medical need associated with aggressive and difficult-to-treat hematological malignancies and solid tumors. To accomplish this
objective, the key elements of our strategy include:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Advance
the clinical development of CER-1236 for the treatment of AML patients</i>. Based on preclinical data generated to date related to the
use of CER-1236 to treat hematological cancers, we intend to initially target relapsed and refractory AML patients for clinical development.
These are aggressive cancers with limited treatment options. Moreover, these cancers represent a significant unmet medical need, and
to date there are no approved CAR-T cell therapies for patients diagnosed with AML. There are approximately 20,000 cases of AML, with
4,800 patients diagnosed annually in the U.S.</span></td>
</tr></table><div>

</div><p style="margin-top: 0; margin-bottom: 0">&#160;</p><div>

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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Leverage
past and current CAR-T product approvals to shorten the regulatory and manufacturing pathway for CER-1236</i>. We have designed our CER-T
cells to share similar construction to currently approved CAR-T cell therapies. The processes and protocols used to produce autologous
CAR-T cells are well recognized, and we expect to benefit from the well-defined regulatory guidelines established by both U.S. and European
regulatory authorities related to CAR-T cell therapy manufacture. Accordingly, we have configured CER-T cell manufacturing processes
to share similarities with those employed in the production of CAR-T cells.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Expand
CER-1236 development activities to target solid tumors</i>. We intend to expand the clinical development of CER-1236 to include solid
tumors. To this end, we plan on evaluating the potential therapeutic utility of CER-1236 to treat NSCLC and ovarian cancer, indications
for which efficacious treatments have proven elusive. We believe CER-1236&#8217;s differentiated mechanism of action enables the enhanced
activity of a broader contingent of immune effector cells, which may allow CER-1236 to achieve success treating cancers for which currently
approved CAR-T cell therapies have demonstrated little clinical benefit.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>The Immune System and its Function</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The immune system is a host
defense system comprising multiple structures and processes within an organism that protects against disease. As with other mammalian
species, the human immune system is segregated into two separate yet interconnected components, the innate immune system and the adaptive
immune system. The innate immune system is responsible for an immediate, non-specific response to infected or diseased cells. Triggering
its activation are pathogen-associated and damage-associated molecular patterns recognized by preconfigured pattern recognition receptors
which reside on the surface of various types of leukocytes, or white blood cells, that make up the innate immune system, including macrophages,
dendritic cells, eosinophils and natural killer (&#8220;NK&#8221;) cells. In addition to its direct participation in eliminating damaged
or diseased cells, certain components of the innate immune system function significantly as antigen-presenting cells (&#8220;APCs&#8221;)
promoting the activity of the adaptive immune system.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The adaptive immune system
is composed of special types of leukocytes known as T and B lymphocytes, also known as T and B cells, respectively. T cells participate
primarily in the cell-mediated immune response while B&#160;cells are involved in the humoral immune response. T cells are an essential
component of the adaptive immune system, targeting specific antigens and either destroying targeted cells directly or participating in
their destruction by activating other immune cells. T cells use T cell specific receptors to recognize antigens presented via major histocompatibility
complex (&#8220;MHC&#8221;) molecules on APCs. Through this mechanism, T cells have the ability to target tumor-transformed or virus infected
cells, as well as help coordinate the activity of other immune cells.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">T cells are differentiated
by the expression of protein markers on their surface. The two most prominent types of T&#160;cells are those that express CD8 molecules
and are known as CD8 T cells, and those that express CD4 molecules and are known as CD4 T cells. CD8 T cells, also referred to as cytotoxic
lymphocytes (&#8220;CTLs&#8221;), eliminate cells which they encounter that are recognized as being infected with viruses or other pathogens
or are otherwise damaged or dysfunctional through a process referred to as cell lysis, which involves the release by these killer T cells
of perforins and granzymes to compromise the integrity of the target cell&#8217;s membrane. Endogenous pathogens are broken down by mechanisms
present in virtually all cells into smaller fragments and presented to CD8 T cells in combination with an MHC class&#160;I molecule. CD4
T cells, also referred to as T helper cells, have limited cytotoxic activity and typically do not kill infected or dysfunctional cells
or eliminate pathogens directly. Instead, they participate in the immune response by providing signals which activate and orchestrate
other types of immune cells to perform these tasks. Professional APCs, such as dendritic cells and macrophages, process exogenous pathogens
and then present small fragments of the degraded pathogen to CD4 T cells in combination with an MHC class&#160;II molecule, through a
phenomenon known as cross-presentation, while antigens of exogenous origin are coupled with an MHC Class&#160;I molecule to amplify CD8
T cell activity. Antigen cross presentation is of particular importance in the immune system&#8217;s response to cancer.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->86<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Genetically Engineered T Cells</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The ability to enhance the
activity of T cells against human cancers through genetic engineering has been among the most significant advances in cancer therapy in
the last decade. Advances in understanding T cells and their role in immunology, and an appreciation of their potential use to treat cancer,
has increased interest in the clinical application of T cells in recent&#160;years, with the field of adoptive immunotherapy attaining
increased prominence as a means of enhancing immune control over tumors. Modern molecular biological techniques allow scientists to introduce
genes into human T cells that enhance T cell activity, expand their numbers and infuse them back into the patient from whom they were
originally collected. We have developed a novel approach to T cell engineering which has enabled us to integrate certain desirable characteristics
of both the innate immune system and the adaptive immune system into a single therapeutic construct intended to optimize cancer therapy.
This novel cellular immunotherapy platform is designed to redirect T cells to eliminate tumors by building in engulfment pathways that
employ phagocytic programs, creating our CER-T cell therapy.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Phagocytosis is a vital cellular
process by which a phagocytic cell engulfs and internalizes a target for elimination and is a major mechanism for the removal of pathogens
and unwanted cells to maintain tissue homeostasis. The human body removes billions of cells daily through phagocytic processes. Phagocytic
removal employs specific cell clearance programs and machinery to eliminate target cells. The process is a crucial part of the innate
immune system and is distinct from the adaptive immune response which involves the generation of cytotoxic T cells to elicit antigen-specific,
cytolytic target elimination. Compared to traditional CAR-T cell approaches, which largely target the adaptive immune system, we developed
CER-T cell therapy to collaboratively mediate both cytotoxic and phagocytic mechanisms to optimize anti-tumor function. By leveraging
both immune responses, we believe CER-T cell therapy has the potential to eliminate cancer cells more effectively and with fewer side
effects than traditional CAR-T cell therapies.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The recognition of phagocytosis
as a therapeutic modality to directly clear cancer cells and initiate anti-tumor T cell immune responses has fueled interest in effectively
engaging phagocytes for use in cancer therapy. Macrophage cell engineering and macrophage-targeting approaches that enhance cytotoxic,
phagocytic and cytokine-mediated anti-tumor function are in development. Early clinical trial data from therapeutic candidates targeting
myeloid inhibitor function has demonstrated the potential to elicit clinical responses. However, the diverse pro-tumor functions of myelo-monocytic
cells may offset these efforts by supporting cancer cell survival, proliferation and the release of factors that may impede anti-tumor
immune responses. Limited in vivo proliferation and manufacturing challenges have also been hurdles in the development of macrophage-based
cellular therapy.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Experimental evidence demonstrates
the ability of CER-T cells to engulf targeted cells, employ cytolytic and non-cytolytic killing mechanisms, and exhibit pro-inflammatory
and antigen processing capabilities that augment the current capabilities of T cell immunotherapy. To that end, we believe CER-1236 cell
therapy, if approved, may become a component of standard of care treatment regimens, used as a monotherapy or in combination with both
small molecule therapeutics and biologics to direct robust tumor elimination.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>The Increasing Prominence of CAR-T Technology</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Immunotherapy is a treatment
that harnesses the components and mechanics of the immune system to address diseases and disorders. Cellular immunotherapy is a form of
immunotherapy that focuses on modulating or enhancing the activity of different immune cells. One of the more prominent and promising
therapeutic uses of T-cells to emerge has been CAR-T cell technology.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">CAR-T therapy recognizes
specific antigens that are present on the surface of tumor cells and destroys them. The concept of CAR-T builds upon the normal biology
of CTLs, whereby naturally occurring receptors serve to activate these cells when a foreign pathogen or cancerous cell is detected. Conventional
CAR-T cell therapy involves the genetic manipulation of a patient&#8217;s T cells to enable these modified cells to express a receptor
designed to bind to a specific surface antigen. To engineer these cells, a fraction of a patient&#8217;s T cells are collected from their
blood, and a viral vector containing the genetic instructions for the CAR is used to insert those genes into the genome of the T cell
through a process known as transduction. Contained in a single viral vector are the genes encoding for each component of the CAR.&#160;Typical
CAR-T cells include the following components:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Antigen
recognition domain</i>. At one end of the CAR is a binding domain that is specific to a targeted antigen. This domain is exposed to the
outside of the engineered lymphocyte, where it can recognize the target antigen or antigens. The extracellular target binding domain
of CAR-T therapies currently approved by the FDA typically use a single-chain variable fragment (&#8220;scFv&#8221;), consisting of the
heavy-chain and light-chain variable regions of an antibody.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 101; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->87<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Extracellular
hinge domain</i>. The hinge domain is a small structural component which extends from the outer cell membrane to the antigen recognition
domain and provides conformational flexibility to facilitate optimal binding of the antigen recognition domain to the targeted antigen
on the surface of the cancer cell.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Transmembrane
domain</i>. This middle portion of the CAR links the antigen recognition domain to the activating elements inside the cell. The transmembrane
domain anchors the CAR in the lymphocyte&#8217;s membrane, bridging the extracellular hinge and antigen recognition domains with the
intracellular signaling domain and provides critical stability to the CAR. In addition, the transmembrane domain may also interact with
other transmembrane proteins that enhance CAR function.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><i>Intracellular
signaling domain</i>. The other end of the CAR, inside the T cell, is connected to two or more contiguous domains responsible for activating
the lymphocyte when the CAR binds to its target antigen. The first, found in almost all CAR constructs, is called CD3&#958;. The CD3&#958;
domain delivers an essential primary signal within the T cell and is the natural basis for activation of these lymphocytes. The current
generation of CAR-T configurations generally employ one or more costimulatory domains, such as CD28, to provide enhanced activation signals
and augment lymphocyte activity. Together, these signals result in the proliferation of the CAR-enabled T cells and selective cellular
destruction. In addition, activated CAR-T cells stimulate the local secretion of cytokines and other molecules that can recruit and activate
additional immune cells to increase target elimination.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The assembly of these core
CAR components is depicted in the schematic presented below to which certain non-coding regulatory sequences may be used to augment viral
gene expression.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Delivery of conventional CAR-T cell therapies involves a single
viral vector.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><img alt="" src="image_002.jpg"/>&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>


</div><!-- Field: Page; Sequence: 102; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->88<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Conventional CAR-T cell therapies often utilize a lentiviral vector
for the delivery of CAR specific genes. Lentiviral particles offer a well-characterized transduction mechanism and are recognized as efficient
and convenient vehicles for gene transfer as they demonstrate broad tropism, or activity, in a wide array of cell types, and can be used
to target quiescent, or non-dividing, cells. In addition, they do not integrate close to the promoter regions of genes with the frequency
of other gene delivery alternatives and lack the immunogenicity of DNA-based vectors, characteristics which provide for enhanced safety.
The use of a lentiviral vector to facilitate ex vivo clinical gene transfer has been demonstrated to be safe in humans for two decades
with minimal genotoxicity observed in hundreds of patients following gene transfer into T cells or hematopoietic progenitor cells.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Currently, six CAR-T cell
therapies have been approved by the FDA for the treatment of certain types of hematological cancers. The first two, approved in 2017,
are axicabtagene ciloleucel, sold by Gilead Sciences under the brand name Yescarta, and tisagenlecleucel, sold by Novartis under the brand
name Kymriah. A third CAR-T cell therapy, brexucabtagene autoleucel, which is comparable to Yescarta and sold by Gilead under the tradename
Tecartus, was approved in 2020. Lisocabtagene matraleucel, sold by Bristol Myers Squibb under the brand name Breyanzi, received FDA approval
in February&#160;2021 with Bristol Myers Squibb also receiving approval for idecabtagene vicleucel, sold under the tradename Abecma, in
March of that year. Most recently, Janssen Biotech received FDA approval for ciltacabtagene autoleucel, brand name Carvykti, to treat
adult patients with relapsed or refractory multiple myeloma and which targets the BCMA protein expressed on cancer cells rather than CD19,
the target of the other approved CAR-T cell therapies. Each of these therapies is an autologous therapy and is made from T cells first
collected from the patient, which are then genetically modified and administered back to the same patient. Sales of CAR-T cell therapies
are anticipated to grow rapidly over the next several&#160;years and are expected to exceed $10&#160;billion by 2030. CAR-constructs incorporating
alternate immune effector cell types, including NK cells and macrophages, are in earlier stages of clinical development and have only
recently entered clinical trials. To date, no CAR-based therapies that employ NK cells or macrophages have received FDA approval. There
are at present no FDA approved CAR T cell products for AML.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>The Limitations of Current CAR-T Technology</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Much of the excitement of
cellular therapy surrounds the curative potential of adoptive transfer of genetically engineered T cells. Adoptively transferred T cells
proliferate upon their engagement with target antigens and represent a form of therapy that can be appropriately characterized as living
and expanding. Efficient targeted killing and tumor elimination may be achieved in a short period of time. However, multiple barriers
limit the efficacy of conventional CAR-T cell therapy. A high rate of side effects often accompany treatment with currently approved products,
especially in those patients with high tumor burdens. In addition, partial responses occur, often associated with immune escape of the
tumor from the CAR or the display by the T cells of an exhaustion phenotype. Moreover, while engineered CAR-T cells have shown remarkable
potential in the treatment of hematological cancers, they have not demonstrated equivalent efficacy in the treatment of solid tumors.
Curative cell therapies for solid tumors currently do not exist and the importance of this limitation is underscored by the prevalence
of solid tumor malignances. The American Cancer Society estimates that solid tumor cancers accounted for more than 1.7&#160;million of
the 1.9&#160;million people newly diagnosed with cancer in 2021. Even in hematological malignancies with approved CAR-T cell therapies,
less toxic orthogonal treatment approaches are needed as cure rates for CD19-targeted CAR-T cell therapies do not exceed 60%.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Challenges to the use of
cellular therapy to address solid tumors often relate to difficulty in developing receptors directed towards targets expressed in high
frequency on cancer cells as well as overcoming the immunosuppressive microenvironments that contribute to ineffective immune responses.
The tumor stroma, made up of a dense fibrotic matrix, often surrounds solid tumors and acts as a physical barrier, which restricts CAR-T
cell access to the tumor. CAR-T cell activity may be further hindered by the tumor microenvironment (&#8220;TME&#8221;). In the TME, multiple
cell types which drive immunosuppression infiltrate solid tumors, including myeloid-derived suppressor cells, tumor-associated macrophages,
and regulatory T cells. The interaction of these cells and the tumor cells increases the expression of signaling molecules that enable
tumor cell proliferation while dampening the generation of co-stimulatory signals necessary for T cell expansion and persistence. In addition,
TME-associated immune dysfunction may result in a down regulation of MHC class&#160;I molecules, limiting proper antigen presentation
and T cell proliferation. Collectively, these attributes of solid tumors enable them to avoid normal immune surveillance. Increased engagement
of the endogenous host response is an important, if not critical, component of CAR-T cell therapy clinical success as the recruitment
into the tumor of bystander lymphocytes has been observed in tumor biopsies from patients with curative CAR-T cell therapy. Enhancing
the host&#8217;s own response to tumor cells offers an important opportunity to improve current CAR T cell responses.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

</div><!-- Field: Page; Sequence: 103; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->89<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">CAR-T recipients may also
incur serious adverse events (&#8220;SAEs&#8221;), perhaps the most prominent of which is cytokine release syndrome (&#8220;CRS&#8221;).&#160;Believed
to be related to the rapid proliferation and activation of T cells upon detection of a target antigen, severe or life-threatening CRS
was noted in a significant number of patients who participated in the registrational trials of FDA-approved CAR-T therapies. These SAEs
can result in patients requiring longer hospitalizations and more intensive medical care. The frequency and severity of observed SAEs
is one of the primary reasons that administration of currently approved CAR-T therapy is restricted to a select number of treatment centers.
Moreover, aside from the low-level expression of certain cancer specific neoantigens, most tumor associated antigens are also found on
normal cells which may lead to serious, if not life threatening, &#8220;on-target, off-tumor&#8221; toxicities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We believe that the preferential
attributes engineered into our CER-T cell therapies have the potential to represent a next-generation adoptive cellular immunotherapy
approach and enable us to overcome many of the limitations which hinder the wider application of current CAR-T technology. The prophagocytic
and immunomodulatory properties of CER-T cells are designed to overcome some of the immunosuppressive elements in many solid tumors. In
addition, their anticipated superior antigen presentation properties may enhance a patient&#8217;s ongoing immune response against tumor
antigens. Lastly, healthy cells have minimal expression of TIM-4 ligand as compared to tumor cells, reducing the potential for on-target
off-tumor effects. In consequence, we envision CER-1236 as having a differentiated mechanism for tumor clearance that enables the potential
for enhanced activity across a broad array of hematological malignancies and solid tumors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>CER-T Cell Therapy Technology</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Distinguishing our CER-1236
cell therapy candidate is the integration into a single therapeutic construct of many of the anti-tumor capabilities resident in both
the innate and the adaptive immune systems. We believe the coupling of these functions better emulates normal immune system activity which
may promote enhanced T cell activation, proliferation and durability for more robust elimination of cancerous cells and reduction in tumor
burden.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We have designed our CER-T
constructs to embrace many of the components found in conventional CAR-T cell therapies. The processes and protocols used to genetically
modify a patient&#8217;s T cells to produce CAR-T cells are well recognized, as is the use of lentivirus in the manufacture of these therapies.
Accordingly, we have constructed CER-1236 cell manufacturing processes to be similar to those of CAR-T cells. We expect to benefit from
the well-defined regulatory guidelines established by both U.S.&#160;and European regulatory authorities related to CAR-T cell therapy
and its use.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>The biological foundations for CER-T cell therapy</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">PS, or TIM-4 ligand, is a
component of a cell&#8217;s plasma membrane and has a key role in cell removal. Under normal physiological conditions, TIM-4-L is restricted
to the inner leaflet of the phospholipid bilayer which makes up the plasma membrane of a cell. However, cellular stresses cause the externalization
of TIM-4-L to the cell surface. Exposure of TIM-4-L on the outer surface acts as an &#8220;eat-me&#8221; signal and marks abnormal, stressed
and dying or dead cells for phagocytic clearance. A variety of tumors have been shown to have constitutively increased surface TIM-4-L
as a result of altered plasma membrane regulation. Among hematologic tumors, loss-of-function mutations in the flippase chaperone transmembrane
protein 30A (&#8220;TMEM30A&#8221;), have been identified in approximately 5% to 11% of patients with diffuse large B cell lymphoma (&#8220;DLBCL&#8221;)
and among a cohort of newly diagnosed patients, this mutation was correlated with improved response to the standard therapeutic regimen
suggesting the host&#8217;s immune elimination of TIM-4-L positive tumor cells enhances tumor clearance. We are seeking to exploit the
presence of TIM-4-L expressed on the outer cell surface of both hematological malignancies and solid tumors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

</div><!-- Field: Page; Sequence: 104; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->90<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>CER-1236: Our Lead Development Candidate</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">As externally oriented TIM-4-L
is present on many cancerous cells regardless of tumor type, we believe a single CER construct may demonstrate clinical utility in treating
an array of cancers. To that end, we have focused our development activities on optimizing the cancer killing capabilities of a specific
CER-T therapeutic design. These efforts have resulted in our lead clinical candidate, CER-1236. In preclinical studies, we have observed
CER-1236 to display attractive functional capabilities and product characteristics, among which are:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">target-dependent
activation, cytotoxicity, anti-tumor cytokine production, and high proliferative capacity;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">tumor
cell phagocytosis;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">distinct
transcriptome, cytokine and chemokine signatures that substantiate the complementary activity of both the innate and adaptive immune
response;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">enhanced
antigen acquisition, processing and presentation;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">no
evidence of T cell exhaustion despite repeated challenges;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">no
observed off-target or off-tumor toxicities;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">expression
and maintenance of diverse T cell populations, including na&#239;ve and memory cells, likely indicative of response persistence and durability;
and</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">well
defined and scalable manufacturing protocols.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We have designed CER-1236
to align with components included in the current generation of conventional CAR-T configurations by fusing the external domain of TIM-4,
a phagocytic receptor, with intracellular signaling domains from T cells and innate immune cells. TIM-4 harbors endogenous phagocytic
capacity through its binding to the pro-phagocytic &#8220;eat-me&#8221; signal TIM-4-L.&#160;CER-1236&#8217;s intracellular signaling
domains, including TLR2, CD28 and CD3&#958; motifs, are designed to augment both TIM-4 mediated phagocytosis and cytotoxic T cell function.
Another similarity between conventional CAR-T therapeutic formats and our CER-T design is the delivery vehicle used in transduction. As
is found in many approved CAR-T therapies, our CER-T technology also employs a lentiviral vector to facilitate gene delivery to patient-derived
T cells. A schematic of the structural elements of CER-1236 is presented below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Schematic of CER-1236</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><i><img alt="" src="image_003.jpg"/>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Abbreviations: TIM-4 = ectodomain
of the T cell immunoglobulin mucin domain protein 4; TLR2 = toll-like receptor 2.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>CER-1236 employs an innovative mechanism of
action</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">CER-1236 is an autologous
T cell therapy candidate designed to target TIM-4-L through the external domain of the prophagocytic receptor TIM-4 protein. This therapeutic
construct was developed to combine adaptive T cell killing activity with phagocytic clearance and antigen presentation activity to create
T cells with enhanced cancer immunotherapy capabilities. The approach builds on the early success of adoptive T cell transfer, which has
demonstrated the ability of T cells to proliferate, traffic, and circulate within both primary and metastatic tumors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">By enhancing phagocytic clearance
and antigen presentation activity and integrating them into T cells, we believe CER-T cells offer the potential for more effective elimination
of cancer cells. The industry&#8217;s decades-long experience with engineered T cell use provides a solid foundation for the development
of CER-1236.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">As the target ligand of our
initial CER-T cell is not an antigen restricted to only certain tumors, CER-1236 T cells may provide clinical benefit across multiple
tumor types. The functional interaction of CER-1236 T cells is depicted in the illustration presented below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt -0.25in; text-indent: 0.25in"><i>CER-1236 T cells are designed to harness the
power of both the innate and adaptive immune systems</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><img alt="" src="image_004.jpg"/>&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;CER-1236 expresses
the external domain of the prophagocytic receptor TIM-4 which is linked to T cell and innate immune cell intracellular signaling domains.
TIM-4 is normally expressed on subsets of macrophages and dendritic cells and harbors endogenous phagocytic capacity through its binding
to and recognition of TIM-4-L.&#160;The intracellular signaling domains in CER-1236 are designed to trigger T cell cytotoxic function
and enhance TIM-4 mediated phagocytosis. CD3&#958; is the signaling component of the TCR and CD28 is a co-stimulatory domain needed for
optimal activation. The TLR2 domain is involved in both innate and adaptive immune responses and activation of TLR2 further enhances
signaling through both NF-&#954;B and the mitogen-activated protein (&#8220;MAP&#8221;) kinase family, promoting T cell activity and
phagocytic uptake. Both CD28 and CD3&#958; signaling domains are incorporated into approved CAR-T cell products. A third generation anti-CD19
CAR-T cell that incorporates a TLR2 domain is currently in clinical development.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">By virtue of the TIM-4 engulfment
receptor and the intracellular signaling domains, CER-1236 combines attributes of both T cells and phagocytic cells. In phagocytic cells,
such as macrophages and dendritic cells, recognition of TIM-4 ligand on the surface of apoptotic cells by native TIM-4 leads internalization
by utilizing integrin coreceptors to activate phagocytic signaling. TIM-4-mediated phagocytosis depends on activation of the RAC1 GTPase
which is similarly targeted by TLR signaling, especially TLR9 and TLR2. However, it has been shown that the intracellular portion of TIM-4
is not required for phagocytosis, and therefore the extracellular domain (&#8220;ECD&#8221;) of TIM-4 appears to function as a tether
during phagocytosis to allow intracellular signaling by other transmembrane phagocytic molecules with which it associates, such as the
integrins which are expressed ubiquitously on T cells. Since CER-1236 contains only the ECD of TIM-4, binding to TIM-4-L on tumor cells
recruits the cell-surface phagocytosis machinery, and simultaneously directly activates CER-1236 T cells through the intracellular CD3&#958;
and CD28 costimulatory domains. Phagocytosis and cytokine secretion are further enhanced by the TLR2 intracellular signaling domain.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>In preclinical studies, CER-1236 empowers T
cells with phagocytic and cytotoxic potency</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In an <i>in vitro</i> evaluation
of the phagocytic potential of CER-1236, CER-transduced T cells demonstrated robust phagocytosis of TIM-4-L.&#160;CER-1236 T cells were
produced by transducing donor T cells using a lentiviral vector encoding for the chimeric receptor CER-1236, yielding a high percentage
of T cells expressing the TIM-4 receptor, in similar CD4:CD8 ratios to untransduced cells. CER-1251 T cells, which express matching intracellular
signaling domains but are unable to bind to TIM-4-L due to a mutation in the gene encoding for the TIM-4 binding site, were also produced
as a negative control.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">TIM-4-L-coated agarose beads
were prelabeled with pHrodo red, a pH-sensitive dye which displays limited fluorescence at neutral pH but generates significant fluorescence
in acidic pH.&#160;The post-phagocytic fusion of phagosomes and lysosomes leads to a drop in pH which can be detected by pH-sensitive
dyes. As is illustrated in the graphic below, CER-1236 T cells co-cultured with TIM-4-L-coated beads displayed significant phagocytic
activity with up to 60% of CER-T cells acquiring a pHrodo red signal, indicative of bead capture and internalization. By contrast, untransduced
T cells and CER-1251 T cells, with a mutation in the TIM-4 binding site, demonstrated minimal phagocytosis.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>CER-1236 displays robust, target-specific phagocytic activity</i></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Gene expression patterns
demonstrate the combined cytotoxic and phagocytic functions of CER-1236 T cells. RNA-sequencing enables the interrogation of the transcriptional
profile of CER-1236 T cells after stimulation with TIM-4-L, with defined separation between the CER-1236 activated cells and the untransduced
and CER-1251 control T cells. As shown in the gene expression profile below, over 1,700 genes were noted to be differentially expressed
in CER-1236 stimulated T cells in comparison to CER-1251 stimulated T cells. Among these genes were those related to pathways with well-known
involvement in regulating phagocytosis, genes involved in nucleation of the ARP-WASP complex, Rho family GTPases, RAC signaling and phagosome
formation. Of note, the RhoG subfamily of GTPase has been previously implicated in TCR-driven phagocytic processes. This aggregate of
transcriptional signatures is indicative of the multi-modal immune response elicited by CER-1236 T cells.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Phagocytic and cytotoxic transcriptional signatures demonstrate
the plasticity of CER-1236 T cells</i></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">CER-1236 T cells were also
observed to generate potent anti-cancer responses in cell lines derived from specific hematological malignancies and solid tumors. A mantle
cell lymphoma (&#8220;MCL&#8221;) cell line that has been modified to constitutively express externalized cell surface TIM-4-L was co-cultured
with either CER-1236 T cells or untransduced T cells. Notably, CER-1236 T cells eliminated 87% of the MCL cells while the untransduced
cells demonstrated minimal cytotoxic ability. In addition, CER-1236 T cells secreted multiple cytokines, including IFN&#947;, granzyme
B and TNF&#945;, all indicative of robust and sustained T cell cytotoxicity. Cytokine secretion was determined to be dependent of binding
to TIM-4-L, as CER-1251 T cells did not secrete cytokines despite exposure to cell surface TIM-4-L.&#160;Further visual evidence of the
cancer-killing capacity of CER-1236 T cells is illustrated in the staining assays depicted in the graphs presented below. In the assays
with no CER-1236 T cells, significant proliferation of cancer cells was observed, as evidenced by the increase in red staining, while
the growth of cancer cells when exposed to CER-1236 T cells was limited. These results are presented in the graph to the left below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>CER-1236 T cells demonstrate potent cytotoxic responses to cancer
cells in vitro</i></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;<img alt="" src="image_008.jpg"/></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Significant cytotoxic activity
of CER-1236 was also noted in an advanced NSCLC cell line, HCC827, which has a mutation in its epidermal growth factor receptor (&#8220;EGFR&#8221;)
gene, a cancer type accounting for between 10% and 15% of all lung adenocarcinoma cases in persons of European descent and higher among
the Asian population. As is depicted in the above, right graph, while the addition of CER-1236 demonstrates moderate cancer cell killing
activity, the addition of osimertinib, the preferred tyrosine kinase inhibitor option for first-line treatment of EGFR-mutation positive
advanced NSCLC, substantially enhanced CER-1236 T cell killing in an Osimertinib concentration dependent manner. In contrast, HCC827 cells
co-cultured with untransduced T cells displayed minimal changes in cell number as compared to cells incubated in the absence of T cells,
at all drug concentrations tested. Conditional cytokine proliferation was also observed with CER-1236 T cell treatment, with IFN&#947;
levels over 400-fold higher in cancer cell cultures which used CER-1236 T cells, in contrast to co-cultures which used untransduced T
cells. The addition of osimertinib to co-cultures further increased IFN&#947; levels by more than two-fold, compared with CER-1236 treatment
alone. Similar trends were observed with TNF&#945; and Granzyme B levels and increases in osimertinib concentrations led to dose-dependent
CER-1236 T cell proliferation. These results demonstrated that CER-1236 T cell activity could be significantly enhanced by upregulating
target expression through concomitant dosing of standard of care medication.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">TIM-4-L, a lipid moiety recognized
by phagocytic cells as an &#8220;eat me&#8221; signal, has previously been shown to be aberrantly upregulated on acute promyelocytic (&#8220;APL&#8221;)
blasts, a subset of AML.&#160;To further interrogate TIM-4-L across other AML subtypes, we evaluated a panel of primary bone marrow samples
and peripheral blood from AML patients. We screened a preliminary panel of primary, treatment-na&#239;ve or on-therapy AML bone marrow
and PBMC samples by flow cytometry: (n=5 adverse, n=5 intermediate, n=1 APL, n=1 familial, n=5 N/A) (Table 1). We observed both high percent
(35.5 % &#177; 21.6) and geometric mean fluorescence index (&#8220;gMFI&#8221;) of cell surface TIM-4-L on a range of AML bone marrow
samples. The median gMFI of tertiles&#160;1-3 was: T1 n=7, gMFI = 5033; T2 n=8, gMFI = 1873; T3 n=8, gMFI = 611. Of note, the two on-therapy
samples showed high percent and gMFI of cell surface TIM-4-L, with a patient receiving 5-azacytidine showing 1.8 fold TIM-4-L gMFI over
median. The second patient receiving TKI therapy showed 3.3 fold TIM-4-L gMFI over median. Healthy donor samples had much lower cell surface
TIM-4-L, with a mean gMFI of 582. Circulating AML leukemic blasts were also evaluated for cell surface TIM-4-L and showed high concordance
with BM blasts, with high levels of cell surface TIM-4-L compared to healthy donor peripheral blood mononuclear cells (&#8220;PBMCs&#8221;).&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Table 1. AML patient characteristics</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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    <td style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Treatment Status: Disease Status</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; vertical-align: bottom; font-weight: bold; text-align: center">Previous Treatments</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; vertical-align: bottom; font-weight: bold; text-align: center">Patient Age At Collection</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Gender</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Race</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Patient:<br/> Ethnicity</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">% Blast Cells</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Risk Category</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Genetic Abnormality</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Cytogenetics</td></tr>
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    <td style="vertical-align: top; text-align: left; width: 22%">200001107</td><td style="text-align: center; width: 0.5%; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; width: 10%; text-align: center">Newly Diagnosed</td><td style="text-align: center; width: 0.5%; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; width: 7%; text-align: center">none</td><td style="text-align: center; width: 0.5%; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; width: 7%; text-align: center">67</td><td style="text-align: center; width: 0.5%; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; width: 7%; text-align: center">Female</td><td style="text-align: center; width: 0.5%; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; width: 7%; text-align: center">White</td><td style="text-align: center; width: 0.5%; vertical-align: top">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="vertical-align: top; text-align: center">71</td><td style="text-align: center; vertical-align: top">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="vertical-align: top; text-align: left">200018493</td><td style="text-align: center; vertical-align: top">&#160;</td>
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    <td style="vertical-align: top; text-align: center">48</td><td style="text-align: center; vertical-align: top">&#160;</td>
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    <td style="vertical-align: top; text-align: center">82</td><td style="text-align: center; vertical-align: top">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="vertical-align: top; text-align: left">200015400</td><td style="text-align: center; vertical-align: top">&#160;</td>
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    <td style="vertical-align: top; text-align: center">51</td><td style="text-align: center; vertical-align: top">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="vertical-align: top; text-align: left">130776684</td><td style="text-align: center; vertical-align: top">&#160;</td>
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    <td style="vertical-align: top; text-align: center">38</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Female</td><td style="text-align: center; vertical-align: top">&#160;</td>
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    <td style="vertical-align: top; text-align: center">&#160;</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">89.78</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td><td style="text-align: center; vertical-align: top">&#160;</td>
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    <td style="vertical-align: top; text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="vertical-align: top; text-align: left">200055487</td><td style="text-align: center; vertical-align: top">&#160;</td>
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    <td style="vertical-align: top; text-align: center">none</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">74</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Male</td><td style="text-align: center; vertical-align: top">&#160;</td>
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    <td style="vertical-align: top; text-align: center">&#160;</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">80.9</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td><td style="text-align: center; vertical-align: top">&#160;</td>
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    <td style="vertical-align: top; text-align: center">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="vertical-align: top; text-align: left">130781611</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Newly Diagnosed</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">none</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">62</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Female</td><td style="text-align: center; vertical-align: top">&#160;</td>
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    <td style="vertical-align: top; text-align: center">&#160;</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">81.67</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Intermediate</td><td style="text-align: center; vertical-align: top">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="vertical-align: top; text-align: left">200015406</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Newly Diagnosed</td><td style="text-align: center; vertical-align: top">&#160;</td>
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    <td style="vertical-align: top; text-align: center">43</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Male</td><td style="text-align: center; vertical-align: top">&#160;</td>
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    <td style="vertical-align: top; text-align: center">&#160;</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">91.37</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Adverse</td><td style="text-align: center; vertical-align: top">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="vertical-align: top; text-align: left">200036152</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Newly Diagnosed</td><td style="text-align: center; vertical-align: top">&#160;</td>
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    <td style="vertical-align: top; text-align: center">85</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Female</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">White</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">70.13</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">&#160;</td><td style="text-align: center; vertical-align: top">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="vertical-align: top; text-align: left">200015557</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Newly Diagnosed</td><td style="text-align: center; vertical-align: top">&#160;</td>
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    <td style="vertical-align: top; text-align: center">69</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Female</td><td style="text-align: center; vertical-align: top">&#160;</td>
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    <td style="vertical-align: top; text-align: center">84</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Intermediate</td><td style="text-align: center; vertical-align: top">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="vertical-align: top; text-align: left">200019235</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Stable</td><td style="text-align: center; vertical-align: top">&#160;</td>
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    <td style="vertical-align: top; text-align: center">Female</td><td style="text-align: center; vertical-align: top">&#160;</td>
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    <td style="vertical-align: top; text-align: center">72.63</td><td style="text-align: center; vertical-align: top">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="vertical-align: top; text-align: left">200018645</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Newly Diagnosed</td><td style="text-align: center; vertical-align: top">&#160;</td>
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    <td style="vertical-align: top; text-align: center">41</td><td style="text-align: center; vertical-align: top">&#160;</td>
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    <td style="vertical-align: top; text-align: center">&#160;</td><td style="text-align: center; vertical-align: top">&#160;</td>
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    <td style="vertical-align: top; text-align: center">APL</td><td style="text-align: center; vertical-align: top">&#160;</td>
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    <td style="vertical-align: top; text-align: center">63</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Female</td><td style="text-align: center; vertical-align: top">&#160;</td>
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    <td style="vertical-align: top; text-align: center">50</td><td style="text-align: center; vertical-align: top">&#160;</td>
    <td style="vertical-align: top; text-align: center">Intermediate</td><td style="text-align: center; vertical-align: top">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="vertical-align: top; text-align: center">&#160;</td><td style="text-align: center; vertical-align: top">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

</div><!-- Field: Page; Sequence: 111; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->97<!-- Field: /Sequence --></span></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>AML from bone marrow or PBMC have elevated cell surface TIM-4-L</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><img alt="" src="image_009.jpg"/>&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">CER-1236 T cells were also
observed to generate potent anti-cancer responses against myeloid malignancies. AML is a heterogenous, and aggressive hematopoietic malignancy
characterized by the rapid buildup of immature myeloid cells in the bone marrow and blood. We used AML cell lines depicted in the graph
below, Kasumi-1 and MV4-11, to demonstrate cytotoxic anti-AML responses in co-culture studies with CER-1236. Similar to in vitro cytotoxicity
results observed with B cell malignancy and NSCLC cell lines, we show the addition of CER-1236 alone to AML cell lines demonstrates potent
cell killing activity. Kasumi-1 harbors a p53 mutation, marking a subset of unfavorable disease risk AML patients, while MV4-11 cells
carry a FLT-3 mutation, a proliferative AML leukemia subset. Both cell lines co-cultured with untransduced T cells displayed minimal changes
in cell number as compared to cells incubated in the absence of T cells. CER-1236 T cells secreted multiple cytokines in co-cultures with
AML cell lines, including IFN&#947;, granzyme B and TNF&#945;, all indicative of robust and sustained T cell cytotoxicity.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

</div><!-- Field: Page; Sequence: 112; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->98<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><img alt="" src="image_010.jpg"/>&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>CER-1236 T cells demonstrate robust in vivo elimination of MCL xenografts</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The cancer killing capacity
of CER-1236 that was demonstrated in studies involving MCL cell lines was also noted in a mouse xenograft model. Immune deficient NOD
scid gamma (&#8220;NSG&#8221;) mice were xenografted with the human REC-1 cell line at Day -2 and then treated with 8&#160;mg/kg ibrutinib
or vehicle and administered CER-1236 T cells daily from Day -1 to study completion. Administration of 7.5e6 CER-1236 T cells in the presence
of ibrutinib resulted in the elimination of REC-1 tumor burden in all 11 of the mice in this treatment cohort. The administration of CER-1236
T cells in the absence of ibrutinib eliminated the tumors in all nine animals treated with CER-1236 T cells alone. No tumor growth inhibition
was observed in either the vehicle-treated or ibrutinib-treated control groups. Median survival for mice receiving CER-1236 T cells with
or without co-administration of ibrutinib was not reached during the study period. The results of this study are presented in the charts
below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0in"><i>A single infusion of CER-1236
T cells eliminates tumors and improves survival</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><img alt="" src="image_011.jpg"/>&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The level of CER-1236 T cells
in peripheral blood displayed robust expansion at Day&#160;7, with or without the concomitant administration of ibrutinib. Animals that
received CER-1236 T cells demonstrated an expansion of over 400-fold as compared to Day 2 levels both in the absence and presence of ibrutinib.
High levels of CER-1236 T cells did not persist in the periphery and animals that received CER-1236 T cells showed a greater than 95%
contraction in cell count from peak numbers by Day 14 with subsequent CER-T cell expansion likely prompted by residual tumor cell encounters.
CER-1236 T cells also maintained robust proliferative capacity despite repeated antigen challenges with no evidence of T cell exhaustion
noted. These findings are illustrated in the following charts.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 113; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->99<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>A single infusion of CER-1236 T cells generated rapid cell
expansion across repeated challenges</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><img alt="" src="image_012.jpg"/>&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>CER-1236 demonstrates in vivo tumor clearance in NSCLC adenocarcinoma
xenograft</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We envisioned that the simultaneous
exposure to both osimertinib and CER-1236 would lead to synergistic in vivo anti-tumor responses. HCC827 NSCLC cells were inoculated into
the flanks of NSG mice. Once established, the mice were dosed with a short course of the EGFR inhibitor osimertinib to prime TIM-4-L antigen
on tumors and administered 2.5e6 CER-1236 T cells. Treatment groups that received the EGFR inhibitor alone, after initial tumor regression,
developed progressive disease, as evidenced in the below left graph. In contrast, animals infused with CER-1236 T cells demonstrated potent
anti-tumor responses in the presence of osimertinib. CER-1236 T cells expanded rapidly in the blood, with the highest expansion observed
in the osimertinib-treated cohorts, as observed in the below right graph. Importantly, no evidence of organ toxicity or weight loss was
observed with increases in body weight recorded in all groups over the course of the study. Analysis of the tumors post-infusion indicated
extensive infiltration of T cells compared to untransduced controls.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>CER-1236 T cells infused to Osimertinib dosed animals showed tumor
elimination and higher levels of T cell expansion</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; font: 10pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: top; text-align: left">
  <td style="text-align: center; width: 50%">&#160;<img alt="" src="image_013.jpg"/></td>
  <td style="text-align: center; width: 50%">&#160;<img alt="" src="image_014.jpg"/></td></tr>
</table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We believe that the preclinical
models of AML, MCL, ovarian cancer and EGFR-mutation positive NSCLC demonstrate the ability of CER-1236 T cells to induce collaborative
innate-adaptive anti-tumor immune responses in both in vitro and in vivo studies. Moreover, concurrent treatment with standard-of-care
therapeutics for each of these indications increases target ligand, conditionally bolstering CER-1236 T cell function to augment anti-tumor
activity. Additionally, in antigen presentation assays, activated CER-1236 T cells exhibited superior cross-presentation ability relative
to conventional T cells, triggering specific TCR-T cell responses in an MHC class&#160;I and TLR-2 dependent manner, overcoming the limited
antigen presentation capabilities of conventional T cells. These results indicate that CER-1236 T cells have the potential to achieve
optimal tumor control by eliciting both cytotoxic effects and cross-priming.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

</div><!-- Field: Page; Sequence: 114; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->100<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>CER-1236 T cells did not elicit safety signals in preclinical safety/toxicology
studies</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Importantly, no evidence
of toxicity was observed during a safety/toxicology study conducted in mice, a clinically relevant model that has an identical structure
of TIM-4-L as humans. The effects of CER-1236 administration were evaluated at 2 doses at 3 and 28 day timepoints. No incidence of anemia,
thrombocytopenia, neutropenia or coagulation abnormalities were recorded in any condition. Hematologic indices, including hemoglobin/hematocrit,
platelets and neutrophils remained stable throughout the study. No perturbation of clinical chemistries was noted. None of the animals
experienced weight loss, morbidity or unexpected mortality. No clinically relevant tissue abnormalities were noted at either timepoint
at the high dose in any organ evaluated. Overall, these data demonstrate a lack of on-target off-tumor responses and support the safety
profile of CER-1236.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The potential for off-target
toxicity by CER-1236 was also tested against primary human cells or iPSC-derived human cells representing vital organs, including the
CNS, heart, lungs, liver, spleen, kidneys, GI tract, and gonads. CER-1236 was co-cultured with these cells and activation was monitored
by IFN&#947; secretion or cytotoxic effect. Over the time points tested, CER-1236 showed potent activation and cytotoxicity against AML
cells (Below, top and bottom graphs), but limited activation (Below, top graph) and no cytotoxicity (Below, bottom graph) against any
of the human cell types tested. These experiments support the lack of off-target responses by CER-1236 T cells.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><img alt="" src="image_015.jpg"/>&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 115; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->101<!-- Field: /Sequence --></span></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><img alt="" src="image_016.jpg"/>&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>CER-1236 Clinical Development Strategy</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Based on the extensive preclinical
data that we have assembled regarding the use of CER-1236 T cells to combat cancer, we intend to commence clinical trials with our initial
treatment target being patients suffering from relapsed, or refractory AML as well as those subsets who are positive for Minimal Residual
Disease and the TP53 mutation. We subsequently intend to expand the clinical development of CER-1236 to include solid tumors such as NSCLC
and ovarian cancer. We expect these clinical trials to evaluate the safety, the potential therapeutic utility and applicable dose of CER-1236.
In addition, we anticipate that these clinical trials may provide insight into the possible use of CER-1236 to treat an array of hematologic
and solid tumors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We believe this drug candidate
has the potential to be a therapy for the unmet needs of targeted indications, if approved, and by leveraging the innate immune system&#8217;s
phagocytic capabilities, could be differentiated by its safety, tolerability, efficacy and clinical benefit over current therapeutic approaches,
which have been observed in preclinical studies. None of the abovementioned statements regarding any of our products in development are
intended to be a prediction or conclusion of efficacy. No clinical trials on our product candidates have commenced so no conclusions relating
to such attributes can be made.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Disease backgrounds</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Acute Myeloid Leukemia</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Acute Myeloid Leukemia (AML) is a cancer of the
blood and bone marrow that affects myeloid cells, cells which normally develop into the various types of mature blood cells. It is a fast-progressing
and aggressive form of blood cancer, with a median time from diagnosis to death of just 5.5 months. Despite over 20 FDA approvals for
AML, the death rate in AML patients has only moderately diminished since the 1990s, with the disease hovering around a 32% 5-year overall
survival rate according to the National Cancer Institute. AML was diagnosed in 21,000 Americans in 2019, and there were 11,000 AML-related
deaths in the same year, according to the Leukemia and Lymphoma Society. Like most cancers, it is a terrifying diagnosis for patients
which often leads to many rounds of treatment and a complete disruption of their lives.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 116; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->102<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Figure 1: Rate of new cases of AML and associated
mortality in the United States 1992-2020</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b><img alt="" src="image_017.jpg"/>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Source: NIH, National Cancer Institute</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">According to Alliance Global Partners, the total
AML therapeutic market is estimated to be approximately USD $1B-$1.5B as of 2023 and projected to grow at a compound annual growth rate
(CAGR) of ~9% based on the historical growth rate, the anticipated approval of new therapeutics, and an increase in the number of total
patients to be diagnosed in the coming years. According to estimates, by 2028, the AML therapeutic market will likely grow to over $2B+,
highlighting the significant economic upside associated with any improvements to the standard of care from the current pipeline therapeutics.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Current therapies and their limitations</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Currently, there are over
20 FDA approved therapeutics in the AML space, with eight approvals having come in just two years from 2017-2019. Before then, AML was
treated with decades-old combination chemotherapy regimens, including cytarabine and anthracycline. This regimen has about a&#160;70-80%
complete response (&#8220;CR&#8221;) rates of adults younger than 60&#160;years and&#160;40-60% of fit adults older than 60&#160;years
old. For those eligible for the chemotherapy regimen and experiencing a CR, many patients with adverse features (70%) undergo allogeneic
HSCT which, in some patients are &#8220;curative.&#8221; Unfortunately, a significant proportion (up to 50%) of AML patients are over
the age of 65 and are &#8220;unfit&#8221; for intensive chemotherapy, requiring different treatment approaches for medically unfit patients.
The treatment landscape for older unfit adults with AML fundamentally changed with the recent availability of new drugs, in particular
the oral B-cell lymphoma 2 inhibitor venetoclax. Venetoclax is used in conjunction with azacytidine to treat these patients, with a complete
response rate ~65%. However the majority of adult patients with AML experience relapse despite initially attaining CR; a venetoclax-based
doublet therapy for medically less-fit adults carries a median survival of ~14.7&#160;months and 4-year survival of less than 20%. The
prognosis for patients who are refractory to or relapse after frontline azacitidine venetoclax is dismal with median overall survival
of 2.4&#160;months, making this an area of high unmet need. Such patients who do not respond to frontline therapy with azacitidine or
venetoclax, and the subset who do not respond to targeted therapies, e.g., IDH1/2 inhibitors, are candidates for investigational trials.
To date, there are no approved cell therapeutic approaches to treat AML.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Ovarian Cancer</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The American Cancer Society estimates for ovarian
cancer in the United States for 2024&#160;are:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif">About
19,680 women will receive a new diagnosis of ovarian cancer.</span></td>
</tr><tr style="vertical-align: top; text-align: justify">
<td>&#160;</td><td style="text-align: left">&#160;</td><td style="text-align: justify">&#160;</td></tr>
     </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt; font-style: normal; font-variant: normal; font-weight: normal">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif">About
12,740 women will die from ovarian cancer.</span></td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Ovarian cancer is one of the leading causes of
cancer deaths among women. A woman&#8217;s risk of getting ovarian cancer during her lifetime is about 1 in 87. Her lifetime chance of
dying from ovarian cancer is about 1 in 130. (These statistics don&#8217;t count low malignant potential ovarian tumors.) This cancer
mainly develops in older women. About half of the women who are diagnosed with ovarian cancer are 63 years or older. It is more common
in White women than Black women.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 117; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->103<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Non-Small Cell Lung Cancer</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Most lung cancer statistics include both small
cell lung cancer (SCLC) and non-small cell lung cancer (NSCLC). In general, about 10% to 15% of all lung cancers are SCLC, and about 80%
to 85% are NSCLC. Lung cancer (both small cell and non-small cell) is the second most common cancer in both men and women in the United
States (not counting&#160;skin cancer).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The American Cancer Society&#8217;s estimates
for lung cancer in the US for 2024 are:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"/><td style="width: 0.25in"><span style="font-size: 10pt; font-family: Times New Roman, Times, Serif">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif">About 234,580 new cases of lung cancer (116,310
in men and 118,270 in women)</span></td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td><td style="text-align: justify">&#160;</td></tr>
                                             </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"/><td style="width: 0.25in"><span style="font-size: 10pt; font-family: Times New Roman, Times, Serif">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif">About 125,070 deaths from lung cancer (65,790
in men and 59,280 in women)</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Lung cancer mainly occurs in older people. Most
people diagnosed with lung cancer are 65 or older; a very small number of people diagnosed are younger than 45. The average age of people
when diagnosed is about 70.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Lung cancer is by far the leading cause of cancer
death in the US, accounting for about 1 in 5 of all cancer deaths. Each year, more people die of lung cancer than of&#160;colon, breast,
and prostate cancers combined.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Overall, the chance that a man will develop lung
cancer in his lifetime is about 1 in 16; for a woman, the risk is about 1 in 17. These numbers include both people who smoke and those
who don&#8217;t smoke. For people who smoke, the risk is much higher, while for those who don&#8217;t, the risk is lower.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"/><td style="width: 0.25in"><span style="font: normal 10pt Times New Roman, Times, Serif">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif">Black men are about 12% more likely to develop
lung cancer than White men. The rate is about 16% lower in Black women than in White women.</span></td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td><td style="text-align: justify">&#160;</td></tr>
                                                                                                            </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"/><td style="width: 0.25in"><span style="font: normal 10pt Times New Roman, Times, Serif">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif">Black and White women have lower rates than men,
but the gap is closing. The lung cancer rate has been dropping among men over the past few decades, but only for about the past decade
in women.</span></td></tr><tr style="vertical-align: top">
<td>&#160;</td><td>&#160;</td><td style="text-align: justify">&#160;</td></tr>
                          </table><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt" width="100%"><tr style="vertical-align: top">
<td style="width: 0.25in"/><td style="width: 0.25in"><span style="font: normal 10pt Times New Roman, Times, Serif">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif">Despite their overall risk of lung cancer being
higher, Black men are&#160;less&#160;likely to develop SCLC than White men.</span></td></tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Statistics on survival in people with lung cancer
vary depending on the type of lung cancer, the stage (extent) of the cancer when it is diagnosed, and other factors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>5-year relative survival rates for non-small
cell lung cancer</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>These numbers are based on people diagnosed
with NSCLC between 2012 and 2018.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; background-color: white; border-collapse: collapse">
  <tr style="vertical-align: top; background-color: White">
    <td style="border-bottom: Black 1.5pt solid; width: 49%; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">SEER stage</span></td>
    <td style="padding-bottom: 1.5pt; width: 1%">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; width: 50%; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">5-year relative survival rate</span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Localized</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">65%</span></td></tr>
  <tr style="background-color: White">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Regional</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">37%</span></td></tr>
  <tr style="background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Distant</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">9%</span></td></tr>
  <tr style="background-color: White">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">All SEER stages combined</span></td>
    <td>&#160;</td>
    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">28%</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Our therapeutic approach and development program</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We anticipate the design
of the clinical development program for CER-1236 to enable our evaluation of its therapeutic utility in treating both hematologic and
solid tumors, as the capacity of a single therapeutic construct to provide clinical benefit across this diversity of tumor types would
represent a significant advance in cancer immunotherapy. Due to the therapy&#8217;s novel mechanism of action, engaging both the innate
and the adaptive immune response, and the broad expression profile of PS on a variety of hematologic and solid tumors, we intend to employ
an adaptive Phase&#160;1 trial design to evaluate patient response to CER-1236. As such, the dosing protocol will emphasize a gradual
increase in the delivered dose with the objective of achieving a clinical signal, while ensuring patient safety. We also intend our Phase&#160;1
trial design to enable an evaluation of appropriate dosing strategies to optimize CER-T engagement and proliferation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

</div><!-- Field: Page; Sequence: 118; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->104<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="text-align: justify; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">We believe, subject to discussions with the FDA
and other regulatory authorities, that there may be a full development path to registration and use in the larger AML patient populations
on achieving positive safety data along with indications of therapeutic benefit in these initial trial cohorts. We believe CER-1236 may
provide significant treatment advantages over currently available therapeutics, including CAR-T therapy as a result of its potential to
enhance objective response rates and the duration of response related to the comprehensive, coordinated engagement of the innate and adaptive
immune systems and a sustained signaling environment. We believe this novel mechanism of action will enable our advance of a single therapeutic
construct to address the substantial unmet need for a safe and effective cell therapy offering an improved therapeutic profile, despite
significant competition. We subsequently anticipate initiating clinical trials for additional indications, including the possible application
of CER-1236 in the treatment of certain solid tumors such as EGFR mutation positive NSCLC and ovarian cancer.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Manufacturing Strategy</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The manufacture of product
candidates derived from our autologous CER-1236 T cells involves the same type of equipment, materials and protocols already used in the
manufacture of currently FDA-approved CAR-T cell therapies, which we believe will provide us numerous benefits. We are planning for CER-1236
cell product to be manufactured using an automated closed process, with product manufacture continuous from bulk harvested cells through
to cryopreserved drug product bags. There are multiple factors involved in the manufacturing process needed to ensure proper CER-T cell
cryopreservation both preceding and following freezing, including the thawing process and post-thaw handling prior to patient administration.
These factors are well understood and procedures have been identified to optimize yield, activity, stability and consistency. In addition,
we may be able to take advantage of the increasing regulatory familiarity with these established protocols. Our expected manufacturing
process embraces a fully automated, closed-system design intended to minimize exposure to potential contaminants and ensure consistent
successful manufacture of the product. The product will be manufactured in a contract manufacturing facility which maintains a quality
system compliant with current Good Manufacturing Practice (&#8220;cGMP&#8221;) requirements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Lentivirus containing CER-1236
will be produced following a cGMP process using cGMP plasmids.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We have entered into a contract
manufacturing agreement related to the production of drug product for our clinical trials, and we anticipate entering into similar arrangements
regarding plasmid, viral vector and final drug product manufacture for drug product to be used in subsequent clinical trial phases in
the future. We intend to advance related process development work both internally and with our contract manufacturing organization (&#8220;CMO&#8221;)
partners. In the event a product candidate receives regulatory approval, we anticipate entering into contract manufacturing agreements
with one or more CMOs to support product launch and commercial manufacture.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Intellectual Property</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Intellectual property is
of vital importance in our field and in biotechnology generally. Our commercial success will depend in part on obtaining and maintaining
patent protection for our current and future product candidates. We seek to protect and enhance proprietary technology, inventions, and
improvements that are commercially important to the development of our business by seeking, maintaining, and defending our patent rights.
When available to expand market exclusivity, our strategy is to obtain or license additional intellectual property related to current
or contemplated development platforms, core elements of technology, and/or clinical candidates. We will also seek to rely on regulatory
protection afforded through inclusion in expedited development and review, data exclusivity, market exclusivity, and patent term extensions,
where available. In addition to patent protection, we also may rely on trademark registration, trade secrets, know-how, other proprietary
information, and continuing technological innovation to develop and maintain our competitive position. We seek to protect and maintain
the confidentiality of proprietary information to protect aspects of our business that are not amenable to, or that we do not consider
appropriate for, patent protection.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

</div><!-- Field: Page; Sequence: 119; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->105<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The term of individual patents
depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which we file, including
the United&#160;States, the patent term is 20&#160;years from the earliest date of filing a non-provisional patent application. In the
United&#160;States, a patent&#8217;s term may be lengthened by patent term adjustment, which compensates a patentee for administrative
delays by the U.S.&#160;Patent and Trademark Office (&#8220;USPTO&#8221;) in examining and granting a patent, or may be shortened if a
patent is terminally disclaimed over an earlier filed patent. In the United&#160;States, the patent term of a patent that covers an FDA-approved
drug may also be eligible for patent term extension, which permits patent term restoration as compensation for the patent term lost during
the FDA regulatory review process. The Hatch-Waxman Act permits a patent term extension of up to five&#160;years beyond the expiration
of the patent. The length of the patent term extension is related to the length of time the drug is under regulatory review. Patent term
extension cannot extend the remaining term of a patent beyond a total of 14&#160;years from the date of product approval, only one patent
applicable to an approved drug may be extended, and only those claims covering the approved drug, a method for using it, or a method for
manufacturing it may be extended. Similar provisions are available in Europe and other foreign jurisdictions to extend the term of a patent
that covers an approved drug. In the future, if and when our product candidates receive FDA approval, we expect to apply for patent term
extensions on patents covering those product candidates. We plan to seek patent term extensions to any issued patents we may obtain in
any jurisdiction where such patent term extensions are available.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In some instances, we submit
patent applications directly to the USPTO as provisional patent applications. Corresponding non-provisional patent applications must be
filed not later than 12&#160;months after the provisional application filing date. While we intend to timely file non-provisional patent
applications relating to our provisional patent applications, we cannot predict whether any such patent applications will result in the
issuance of patents that provide us with any competitive advantage.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We will file U.S. non-provisional
applications and Patent Cooperation Treaty (&#8220;PCT&#8221;) applications that claim the benefit of the priority date of earlier filed
provisional applications, when applicable. The PCT system allows a single application to be filed within 12 months of the original priority
date of the provisional patent application, and to designate all of the PCT member states in which national phase patent applications
can later be pursued based on the international patent application filed under the PCT. The PCT search authority performs a patentability
search and issues a non-binding patentability opinion which can be used to evaluate the chances of success for the national applications
in foreign countries prior to having to incur the filing fees. Although a PCT application does not issue as a patent, it allows the applicant
to seek protection in any of the member states through national-phase patent applications. At the end of the period of 30 months from
the first priority date of the provisional patent application, separate national phase patent applications can be pursued in any of the
PCT member states either by direct national filing, or in some cases, by filing through a regional patent organization, such as the European
Patent Office. The PCT system delays expenses, allows a limited evaluation of the chances of success for national/regional patent applications,
and enables substantial savings where applications are abandoned within the first thirty months of filing.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">For all patent applications,
we determine claiming strategy on a case-by-case basis. Advice of counsel and our business model and needs are always considered. We continuously
reassess the number and type of patent applications, as well as the scope of our patent claims to pursue coverage and value for our processes
and compositions, given existing patent office rules and regulations. Further, claims may be modified during patent prosecution to meet
our intellectual property and business needs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We have sought patent protection
in the United States and various international jurisdictions related to the CER-1236 T cell technology platform and its constructs, as
well as their use as individual cellular compositions and product candidates targeting specific diseases. We also intend to seek patent
protection related to the processes and materials used in CER-1236 T cell expression as well as its use in combination therapies. As of
December 2, 2024, our patent portfolio comprises nine different patent families filed in various jurisdictions worldwide. These patent
families include two issued patents in the United States, one of which relates to CER-1236; 34 pending U.S. applications; twelve issued
patents in France, Germany, Italy, Spain, United Kingdom, China, Japan, Hong Kong, and Mexico; and 29 pending applications in Canada,
China, Europe, Hong Kong, Japan, and Korea. These patents and applications, if and when issued, are projected to expire from 2037 to 2042,
absent any available patent term adjustments or extensions. We intend to pursue, when possible, further composition, method of use, dosing,
formulation, and other patent protection directed to our current and new product candidates. We may also pursue patent protection with
respect to manufacturing and drug development processes and technology.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

</div><!-- Field: Page; Sequence: 120; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->106<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The following issued patents
are directed at a composition of matter and provide coverage for our CER-1236 T cell candidate:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">U.S. Patent No. 11,708,423,
having an anticipated expiration date of March 26, 2039, including 186 days of patent term adjustment awarded by the USPTO;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">EP Patent No. 3,519,441 (validated
in the United Kingdom, France, Spain, Germany, and Italy), having an anticipated expiration date of September 26, 2037, absent any available
patent term adjustments or extensions;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">JP Patent No. 7286658 having
an anticipated expiration date of September 21, 2038, absent any available patent term adjustments or extensions; and</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">CN Patent No. ZL201880076426.1
having an anticipated expiration date of September 21, 2038, absent any available patent term adjustments or extensions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Competition</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The biotechnology and pharmaceutical
industries have made substantial investments in recent&#160;years into the rapid development of novel immunotherapies for the treatment
of a range of pathologies, including cancers, making this a highly competitive market.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We face substantial competition
from multiple sources, including large and specialty pharmaceutical, biopharmaceutical and biotechnology companies, academic research
institutions and governmental agencies, and public and private research institutions. Our competitors compete with us based on the specific
technologies employed, and on the stage of product candidate development. In addition, many small biotechnology companies have formed
collaborations with large, established companies to (i)&#160;obtain support for their research, development, and commercialization of
products, or (ii)&#160;combine several treatment approaches to develop longer lasting or more efficacious treatments that may potentially
directly compete with our current or future product candidates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition to the current
standard of care treatments for patients with cancer, numerous commercial and academic preclinical studies and clinical trials are being
undertaken by a large number of parties to assess novel technologies and product candidates in the field of immunotherapy. Results from
these studies and trials have fueled increasing levels of interest in the field of immunotherapy. Accordingly, we face competition from
numerous pharmaceutical and biotechnology entities related to the development of cellular-based therapies to treat cancer. We expect to
face competition from other companies developing TCR T therapies, such as Adaptimmune Therapeutics, plc GlaxoSmithKline plc, MediGene
AG, TCR2 Therapeutics Inc., TScan Therapeutics Inc. and Ziopharm Oncology, Inc. We also may compete with other T cell therapy companies
with target discovery platforms, such as Adaptive Therapeutics, Inc., Immatics, N.V., 3T Biosciences, Inc., and Sana Biotechnology, Inc.,
among others. We may also compete against a significant number of companies engaged in the development of autologous and allogeneic CAR-
T, CAR-NK, TIL and T cell engager technologies including larger companies such as Gilead Sciences, Inc., Bristol-Myers Squibb Company
and Amgen, Inc. as well as smaller companies such as Nkarta Inc., Allogene Therapeutics Inc., Century Therapeutics Inc., and Fate Therapeutics
Inc., among others.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Many of our competitors,
either alone or in combination with their respective strategic partners, have significantly greater financial resources and expertise
in R&amp;D, manufacturing, the regulatory approval process, and marketing than we do. Mergers and acquisitions activity in the pharmaceutical,
biopharmaceutical, and biotechnology sector is likely to result in greater resource concentration among a smaller number of our competitors.
Smaller or early-stage companies may also prove to be significant competitors, particularly through sizeable collaborative arrangements
with established companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel,
establishing clinical trial sites and patient registration for clinical trials, and acquiring technologies complementary to, or necessary
for, our programs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our commercial opportunity
could be reduced or eliminated if one or more of our competitors develop and commercialize products that are safer, more effective, better
tolerated, or of greater convenience or economic benefit than our proposed product offering. Our competitors also may be in a position
to obtain FDA or other regulatory approval for their products more rapidly, resulting in a stronger or dominant market position before
we are able to enter the market. The key competitive factors affecting the success of all of our programs are likely to be product safety,
efficacy, convenience, and treatment cost.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

</div><!-- Field: Page; Sequence: 121; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->107<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In the event we receive regulatory
approval for any of our product candidates, we will likely compete with other cost-effective and reimbursable treatments used to treat
cancer. The most common treatment modalities for patients with cancer are surgery, radiation, and drug therapy, including chemotherapy,
hormone therapy, biologic therapy, such as monoclonal and bispecific antibodies, immunotherapy, and cell-based therapy, used alone or
in combination to enhance efficacy. Our CER-T cell therapy candidates, if any are approved, may not be competitive with them. Some of
these drugs are branded and subject to patent protection, and others are available on a generic basis. Insurers and other third-party
payors may also encourage the use of generic products or specific branded products. As a result, obtaining market acceptance of any of
our CER-T cell therapies that we successfully introduce to the market may pose challenges.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Government Regulation</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In the United&#160;States,
biological products are licensed by the FDA for marketing under the Public Health Service Act (&#8220;PHS Act&#8221;) and regulated under
the Federal Food, Drug, and Cosmetic Act (&#8220;FDCA&#8221;). Both the FDCA and the PHS Act and their corresponding regulations govern,
among other things, the testing, manufacturing, safety, purity, potency, efficacy, labeling, packaging, storage, recordkeeping, distribution,
marketing, sales, import, export, reporting, advertising, and other promotional practices involving biological products. FDA clearance
of an IND application must be obtained before commencing clinical testing of biological products. FDA licensure also must be obtained
before marketing of biological products. The process of obtaining regulatory approvals and the subsequent compliance with appropriate
federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>U.S.&#160;Development Process</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">The process required by the FDA before a biological
product may be marketed in the United&#160;States generally involves the following:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">completion
of nonclinical laboratory tests and animal studies according to Good Laboratory Practices (&#8220;GLPs&#8221;) and applicable requirements
for the humane use of laboratory animals or other applicable regulations;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">preparation
of clinical trial material in accordance with cGMPs;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">submission
to the FDA of an application for an IND application, which must become effective before human clinical trials may begin;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">approval
by an institutional review board (&#8220;IRB&#8221;), reviewing each clinical site before each clinical trial may be initiated;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">performance
of adequate and well-controlled human clinical trials according to Good Clinical Practice (&#8220;GCP&#8221;) requirements and any additional
requirements for the protection of human research subjects and their health information, to establish the safety, purity, potency, and
efficacy, of the proposed biological product for its intended use;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">submission to the FDA of a Biologics License Application (&#8220;BLA&#8221;) for marketing approval that includes substantive evidence of safety, purity, potency, and efficacy from results of nonclinical testing and clinical trials;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">satisfactory
completion of an FDA inspection prior to BLA approval of the manufacturing facility or facilities where the biological product is produced
to assess compliance with cGMPs, to assure that the facilities, methods, and controls are adequate to preserve the biologic&#8217;s identity,
strength, quality, and purity;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">potential
FDA audit of the nonclinical and clinical study sites that generated the data in support of the BLA;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">potential
FDA advisory committee meeting to elicit expert input on critical issues and including a vote by external committee members;</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">FDA
review and approval, or licensure, of the BLA, and payment of associated user fees, when applicable; and</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">compliance
with any post-approval requirements, including the potential requirement to implement a Risk Evaluation and Mitigation Strategy (&#8220;REMS&#8221;),
and the potential requirement to conduct post approval studies.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Before testing any biological
product candidate in humans, the product candidate enters the preclinical testing stage. Nonclinical tests include laboratory evaluations
of product chemistry, pharmacology, toxicity, and formulation, as well as animal studies to assess the potential safety and activity of
the product candidate. The conduct of the nonclinical tests must comply with federal regulations and requirements including GLPs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The clinical study sponsor
must submit the results of the nonclinical tests, together with manufacturing information, analytical data, any available clinical data
or literature, and a proposed clinical protocol, to the FDA as part of the IND.&#160;Some nonclinical testing typically continues after
the IND is submitted. An IND is an exemption that allows an unapproved product to be shipped in interstate commerce for use in an investigational
clinical trial and a request for FDA authorization to administer an investigational product to humans. The IND automatically becomes effective
30&#160;days after receipt by the FDA, unless the FDA requests certain changes to a protocol before the trial can begin, or the FDA places
the clinical trial on a clinical hold within that 30-day time period. In such a case, the IND sponsor and the FDA must resolve any outstanding
concerns before the clinical trial can begin. The FDA may also impose clinical holds on a biological product candidate at any time before
or during clinical trials due to safety concerns or non-compliance. If the FDA imposes a clinical hold, trials may not recommence without
FDA authorization and then only under terms authorized by the FDA.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Clinical trials may involve
the administration of the biological product candidate to healthy volunteers or subjects under the supervision of qualified investigators.
Clinical trials involving some products for certain diseases, including some rare diseases may begin with testing in patients with the
disease. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures,
subject selection, and exclusion criteria, and the parameters to be used to monitor subject safety, including stopping rules that assure
a clinical trial will be stopped if certain adverse events should occur. Each protocol and any amendments to the protocol must be submitted
to the FDA as part of the IND.&#160;Clinical trials must be conducted and monitored in accordance with the FDA&#8217;s regulations comprising
the GCP requirements, including the requirement that all research subjects or his or her legal representative provide informed consent.
Further, each clinical trial must be reviewed and approved by an independent IRB, at or servicing each institution at which the clinical
trial will be conducted. An IRB is charged with protecting the welfare and rights of study participants and considers such items as whether
the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The
IRB also approves the form and content of the informed consent that must be signed by each clinical trial subject or his or her legal
representative and must monitor the clinical trial until completed. Additionally, some trials are overseen by an independent group of
qualified experts organized by the trial sponsor, known as a data safety monitoring board or committee.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">Human clinical trials are typically conducted
in three sequential phases that may overlap or be combined:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Phase
1</i></b>. The biological product is initially introduced into healthy human subjects and tested for safety. In the case of some products
for rare diseases, the initial human testing is often conducted in patients.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Phase
2</i></b>. The biological product is evaluated in a limited patient population to identify possible adverse effects and safety risks,
preliminarily evaluate the efficacy of the product for specific targeted diseases, and determine dosage tolerance, optimal dosage, and
dosing schedule.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b><i>Phase
3</i></b>. Clinical trials are undertaken to further evaluate dosage, clinical efficacy, potency, and safety in an expanded patient population
at geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the
product and provide an adequate basis for product labeling. In biologics for rare diseases where patient populations are small and there
is an urgent need for treatment, Phase 3 trials might not be required if an adequate risk/benefit can be demonstrated by the Phase 2
trial.</span></td>
</tr></table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Post-approval clinical trials,
sometimes referred to as Phase&#160;4 clinical trials, may be conducted after initial marketing approval. These clinical trials are used
to gain additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safety
follow-up.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">During all phases of clinical
development, the FDA requires extensive monitoring and auditing of all clinical activities, clinical data, and clinical trial investigators.
Annual progress reports detailing the results of the clinical trials must be submitted to the FDA.&#160;Written IND safety reports must
be promptly submitted to the FDA and the investigators for serious and unexpected adverse events, any findings from other studies, tests
in laboratory animals or in vitro testing that suggest a significant risk for human subjects, or any clinically important increase in
the rate of serious suspected adverse reactions over those listed in the protocol or investigator brochure. The sponsor must submit an
IND safety report within 15 calendar&#160;days after the sponsor determines that the information qualifies for such reporting. The sponsor
also must notify the FDA of any unexpected fatal or life-threatening suspected adverse reaction within 7 calendar&#160;days after the
sponsor&#8217;s initial receipt of the information. Phase&#160;1, Phase&#160;2, and Phase&#160;3 clinical trials may not be completed
successfully within any specified period, if at all. The FDA or the sponsor or its data safety monitoring board may suspend a clinical
trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable
health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being
conducted in accordance with the IRB&#8217;s requirements or if the biologic has been associated with unexpected serious harm to patients.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Concurrent with clinical
trials, companies usually complete additional animal studies and must also develop additional information about the physical characteristics
of the biologic as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements.
To help reduce the risk of the introduction of adventitious agents with use of biologics, the PHS Act emphasizes the importance of manufacturing
control for products whose attributes cannot be precisely defined. The manufacturing process must be capable of consistently producing
quality batches of the product candidate and, among other things, the sponsor must develop methods for testing the identity, strength,
quality, potency, and purity of the final biological product. Additionally, appropriate packaging must be selected and tested and stability
studies must be conducted to demonstrate that the biological product candidate does not undergo unacceptable deterioration over its shelf
life.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">There are also various laws
and regulations regarding laboratory practices, the experimental use of animals, and the use and disposal of hazardous or potentially
hazardous substances in connection with the research. In each of these areas, the FDA and other regulatory authorities have broad regulatory
and enforcement powers, including the ability to levy fines and civil penalties, suspend or delay issuance of approvals, seize or recall
products, and withdraw approvals.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Information about certain
clinical trials must be submitted within specific timeframes for public dissemination on the clinicaltrials.gov website. Sponsors or distributors
of investigational products for the diagnosis, monitoring, or treatment of one or more serious diseases or conditions must also have a
publicly available policy on evaluating and responding to requests for expanded access requests.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>U.S.&#160;Review and Approval Processes</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">After the completion of clinical
trials of a biological product, FDA approval of a BLA must be obtained before commercial marketing of the product begins. The BLA must
include results of product development, laboratory, and animal studies, human studies, information on the manufacture and composition
of the product, proposed labeling, and other relevant information. The testing and approval processes require substantial time and effort
and there can be no assurance that the FDA will accept the BLA for filing and, even if filed, that any approval will be granted on a timely
basis, if at all.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->110<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Under the Prescription Drug
User Fee Act, as amended (&#8220;PDUFA&#8221;), each BLA may be accompanied by a significant user fee. Under federal law, the submission
of most applications is subject to an application user fee. The sponsor of an approved application is also subject to an annual program
fee. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application
filed by a small business. Additionally, no user fees are assessed on BLAs for product candidates designated as orphan drugs, unless the
product candidate also includes a non-orphan indication.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Within 60&#160;days following
submission of the application, the FDA reviews a BLA submitted to determine if it is substantially complete before the agency accepts
it for filing. The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable at the time of submission and may
request additional information. In this event, the BLA must be resubmitted with the additional information. The resubmitted application
is also subject to review before the FDA accepts it for filing. The application also needs to be published and submitted in an electronic
format that can be processed through the FDA&#8217;s electronic systems. If the electronic submission is not compatible with the FDA&#8217;s
systems, the BLA can be refused for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review
of the BLA.&#160;The FDA reviews the BLA to determine, among other things, whether the proposed product is safe, potent, and effective,
for its intended use, and has an acceptable purity profile, and whether the product is being manufactured in accordance with cGMPs to
assure and preserve the product&#8217;s identity, safety, strength, quality, potency and purity. The FDA may refer applications for novel
products or products that present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes
clinicians and other experts, for review, evaluation, and a recommendation as to whether the application should be approved and under
what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully
when making decisions. During the biological product approval process, the FDA also will determine whether a REMS is necessary to assure
the safe use of the biological product. If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS; the
FDA will not approve the BLA without a REMS, if required.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Before approving a BLA, the
FDA may inspect the facilities at which the product is manufactured. The FDA will not approve the product unless it determines that the
manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product
within required specifications. Additionally, before approving a BLA, the FDA will typically inspect one or more clinical trial sites
to assure that the clinical trials were conducted in compliance with IND study requirements and GCP requirements. To assure cGMP and GCP
compliance, an applicant must incur significant expenditure of time, money, and effort in the areas of training, record keeping, production
and quality control.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Notwithstanding the submission
of relevant data and information, the FDA may ultimately decide that the BLA does not satisfy its regulatory criteria for approval and
deny approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than the sponsor
interprets the same data. If the agency decides not to approve the BLA in its present form, the FDA will issue a complete response letter
that describes all of the specific deficiencies in the BLA identified by the FDA.&#160;The deficiencies identified may be minor, such
as requiring labeling changes, or major, such as requiring additional clinical trials. Additionally, the complete response letter may
include recommended actions that the applicant might take to place the application in a condition for approval. If a complete response
letter is issued, the applicant may either resubmit the BLA, addressing all of the deficiencies identified in the letter, or withdraw
the application.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If a product receives regulatory
approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited,
which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings, or precautions
be included in the product labeling. The FDA may impose restrictions and conditions on product distribution, prescribing, or dispensing
in the form of a risk management plan, or otherwise limit the scope of any approval. In addition, the FDA may require post-marketing clinical
trials, sometimes referred to as Phase&#160;4 clinical trials, designed to further assess a biological product&#8217;s safety and effectiveness,
and testing and surveillance programs to monitor the safety of approved products that have been commercialized. As a condition for approval,
the FDA may also require additional nonclinical testing as a Phase&#160;4 commitment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">One of the performance goals
agreed to by the FDA under the PDUFA is to review standard BLAs in ten&#160;months from filing and priority BLAs in six&#160;months from
filing, whereupon a review decision is to be made. The FDA does not always meet its PDUFA goal dates for standard and priority BLAs and
its review goals are subject to change from time to time. The review process and the PDUFA goal date may be extended by three&#160;months
if the FDA requests or the BLA sponsor otherwise provides additional information or clarification regarding information already provided
in the submission within the last three&#160;months before the PDUFA goal date.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 125; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->111<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Post-Approval Requirements</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Maintaining substantial compliance
with applicable federal, state, and local statutes and regulations requires the expenditure of substantial time and financial resources.
Rigorous and extensive FDA regulation of biological products continues after approval, particularly with respect to cGMP.&#160;We will
rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantities of any products that we
may commercialize. Manufacturers of our products are required to comply with applicable requirements in the cGMP regulations, including
quality control and quality assurance and maintenance of records and documentation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;Following approval,
the manufacturing facilities are subject to inspections by the FDA, and such inspections may result in an issuance of FDA Form&#160;483
deficiency observations, untitled letter, or a warning letter, which can lead to plant shutdown and other more serious penalties and fines.
Prior to the institution of any manufacturing changes, a determination needs to be made regarding whether FDA approval is required in
advance. If not done in accordance with FDA expectations, the FDA may restrict supply and may take further action. Product reports are
required to be submitted annually. Other post-approval requirements applicable to biological products include reporting of cGMP deviations
that may affect the identity, potency, purity, and overall safety of a distributed product, recordkeeping requirements, reporting of adverse
events, reporting updated safety and efficacy information, and complying with electronic record and signature requirements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;After a BLA is approved,
the product also may be subject to official lot release. As part of the manufacturing process, the manufacturer is required to perform
certain tests on each lot of the product before it is released for distribution. If the product is subject to official release by the
FDA, the manufacturer submits samples of each lot of product to the FDA together with a release protocol showing a summary of the history
of manufacture of the lot and the results of all of the manufacturer&#8217;s tests performed on the lot. The FDA also may perform certain
confirmatory tests on lots of some products, such as viral vaccines, before releasing the lots for distribution by the manufacturer. In
addition, the FDA may conduct laboratory research related to the regulatory standards on the safety, purity, potency, and effectiveness
of biological products. Systems need to be put in place to record and evaluate adverse events reported by health care providers and patients
and to assess product complaints. An increase in severity or new adverse events can result in labeling changes or product recall. Defects
in manufacturing of commercial products can result in product recalls.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We also must comply with
the FDA&#8217;s advertising and promotion requirements, such as those related to direct-to-consumer advertising, the prohibition on promoting
products for uses or inpatient populations that are not described in the product&#8217;s approved labeling (known as &#8220;off-label
use&#8221;), industry-sponsored scientific and educational activities, and promotional activities involving the internet. Discovery of
previously unknown problems or the failure to comply with the applicable regulatory requirements may result in restrictions on the marketing
of a product or withdrawal of the product from the market as well as possible civil or criminal sanctions. Failure to comply with the
applicable U.S.&#160;requirements at any time during the product development process, approval process, or after approval may subject
an applicant or manufacturer to administrative or judicial civil or criminal sanctions and adverse publicity. FDA sanctions could include
refusal to approve pending applications, withdrawal of an approval or license revocation, clinical hold, warning or untitled letters,
product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government
contracts, mandated corrective advertising or communications with doctors, debarment, restitution, disgorgement of profits, or civil or
criminal penalties. Any agency or judicial enforcement action could have a material adverse effect.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Biological product manufacturers
and other entities involved in the manufacture and distribution of approved biological products are required to register their establishments
with the FDA and certain state agencies, and they are subject to periodic unannounced inspections by the FDA and certain state agencies
for compliance with cGMPs and other laws. Accordingly, manufacturers must continue to expend time, money, and effort in the areas of production
and quality control to maintain cGMP compliance. Manufacturers and other parties involved in the drug supply chain for prescription drug
products must also comply with product tracking and tracing requirements and for notifying the FDA of counterfeit, diverted, stolen and
intentionally adulterated products or products that are otherwise unfit for distribution in the United&#160;States. Discovery of problems
with a product after approval may result in restrictions on a product, manufacturer, or holder of an approved BLA, including withdrawal
of the product from the market. In addition, changes to the manufacturing process or facility generally require prior FDA approval before
being implemented, and other types of changes to the approved product, such as adding new indications and additional labeling claims,
are also subject to further FDA review and approval.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->112<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Orphan Drug Designation</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Under the Orphan Drug Act,
the FDA may grant orphan drug designation (&#8220;ODD&#8221;), to a biological product intended to treat a rare disease or condition,
which is generally a disease or condition that affects fewer than 200,000 individuals in the United&#160;States, or more than 200,000
individuals in the United&#160;States and for which there is no reasonable expectation that the cost of developing and making a biological
product available in the United&#160;States for this type of disease or condition will be recovered from sales of the product. ODD must
be requested before submitting a BLA.&#160;After the FDA grants ODD, the identity of the therapeutic agent and its potential orphan use
are disclosed publicly by the FDA.&#160;ODD does not convey any advantage in or shorten the duration of the regulatory review and approval
process.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If a product that has ODD
receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan product
exclusivity, which means that the FDA may not approve any other applications to market the same biological product for the same indication
for seven&#160;years, except in limited circumstances, such as not being able to supply the product for patients or showing clinical superiority
to the product with orphan exclusivity.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Competitors, however, may
receive approval of different products for the indication for which the orphan product has exclusivity or obtain approval for the same
product but for a different indication for which the orphan product has exclusivity. Orphan product exclusivity also could block the approval
of one of our products for seven&#160;years if a competitor obtains approval of the same biological product as defined by the FDA or if
our product candidate is determined to be contained within the competitor&#8217;s product for the same indication or disease. If a biological
product designated as an orphan product receives marketing approval for an indication broader than what is designated, it may not be entitled
to orphan product exclusivity.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Expedited Review and Approval Programs</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The FDA has various programs,
including fast track designation, priority review, accelerated approval, and breakthrough therapy designation, that are intended to expedite
or simplify the process for the development and FDA review of biological products that are intended for the treatment of serious or life-threatening
diseases or conditions and demonstrate the potential to address unmet medical needs. The purpose of these programs is to provide important
new biological products to patients earlier than under standard FDA review procedures. To be eligible for a fast track designation, the
FDA must determine, based on the request of a sponsor, that a biological product is intended to treat a serious or life-threatening disease
or condition and demonstrates the potential to address an unmet medical need. The FDA will determine that a product will fill an unmet
medical need if it will provide a therapy where none exists or provide a therapy that may be potentially superior to existing therapy
based on efficacy or safety factors. In addition to other benefits, such as the ability to have greater interactions with the FDA, the
FDA may initiate review of sections of a fast track BLA before the application is complete, a process known as rolling review.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The FDA may give a priority
review designation, such as a rare pediatric disease designation, to biological products that treat a serious condition and, if approved,
would provide a significant improvement in safety or effectiveness. A priority review means that the goal for the FDA to review an application
is six&#160;months, rather than the standard review of ten&#160;months under current PDUFA guidelines. Most products that are eligible
for fast track designation may also be considered appropriate to receive a priority review. In addition, biological products studied for
their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over
existing treatments may receive accelerated approval and may be approved on the basis of adequate and well-controlled clinical trials
establishing that the biological product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit,
or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict
an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of
the condition and the availability or lack of alternative treatments. As a condition of approval, the FDA may require a sponsor of a biological
product receiving accelerated approval to perform adequate and well-controlled post-marketing studies to verify and describe the predicted
effect on irreversible morbidity or mortality or other clinical endpoint. Under the Food and Drug Omnibus Reform Act of 2022 (&#8220;FDORA&#8221;),
the FDA may require, as appropriate, that such trials be underway prior to approval or within a specific time period after the date of
approval for a product granted accelerated approval.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Under FDORA, the FDA has
increased authority for expedited procedures to withdraw approval of a drug or indication approved under accelerated approval if, for
example, the confirmatory trial fails to verify the predicted clinical benefit of the product. In addition, for products being considered
for accelerated approval, the FDA generally requires, unless otherwise informed by the agency, that all advertising and promotional materials
intended for dissemination or publication within 120&#160;days of marketing approval be submitted to the agency for review during the
pre-approval review period.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Moreover, a sponsor can request
designation of a product candidate as a &#8220;breakthrough therapy.&#8221; A breakthrough therapy is defined as a drug or biological
product that is intended, alone or in combination with one or more other drugs or biologics, to treat a serious or life-threatening disease
or condition, and preliminary clinical evidence indicates that the drug or biological product may demonstrate substantial improvement
over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical
development. Drug and biological products designated as breakthrough therapies are also eligible for accelerated approval. The FDA must
take certain actions, such as holding timely meetings and providing advice, intended to expedite the development and review of an application
for approval of a breakthrough therapy.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Even if a product qualifies
for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decides
that the time period for FDA review or approval will not be shortened. Furthermore, fast-track designation, priority review, accelerated
approval, and breakthrough therapy designation do not change the standards for approval and may not ultimately expedite the development
or approval process.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Biologics Price Competition and Innovation
Act</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Biologics Price Competition
and Innovation Act of 2009 (&#8220;BPCIA&#8221;), which was enacted as part of the Patient Protection and Affordable Care Act, as amended
by the Health Care and Education Reconciliation Act&#160;of&#160;2010 (collectively, the &#8220;Affordable Care Act&#8221;), created an
abbreviated approval pathway for biological products that are demonstrated to be &#8220;biosimilar&#8221; or &#8220;interchangeable&#8221;
with an FDA-licensed reference biological product via an approved BLA.&#160;Biosimilarity to an approved reference product requires that
there be no differences in conditions of use, route of administration, dosage form, and strength, and no clinically meaningful differences
between the biological product and the reference product in terms of safety, purity, and potency. Biosimilarity is demonstrated in steps
beginning with rigorous analytical studies or &#8220;fingerprinting&#8221;, in vitro studies, in vivo animal studies, and generally at
least one clinical study. If at any point in the stepwise biosimilarity process a significant difference is observed, then the products
are not biosimilar, and the development of a standalone BLA is necessary. In order to meet the higher hurdle of interchangeability, a
sponsor must demonstrate that the biosimilar product can be expected to produce the same clinical result as the reference product, and
for a product that is administered more than once, that the risk of switching between the reference product and biosimilar product is
not greater than the risk of maintaining the patient on the reference product. Complexities associated with the larger, and often more
complex, structures of biological products, as well as the process by which such products are manufactured, pose significant hurdles to
implementation that are still being evaluated by the FDA.&#160;Under the BPCIA, a reference biologic is granted 12&#160;years of exclusivity
from the time of first licensure of the reference product.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i>&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Regulation&#160;Outside of the United&#160;States</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition to regulations
in the United&#160;States, we are subject to a variety of regulations in other jurisdictions governing clinical studies, commercial sales,
and distribution of our products. Most countries outside of the United&#160;States require that clinical trial applications be submitted
to and approved by the local regulatory authority for each clinical study. In the European Union (the &#8220;European Union&#8221;), for
example, an application must be submitted to the national competent authority and an independent ethics committee in each country in which
we intend to conduct clinical trials, much like the FDA and IRB, respectively. Under the Clinical Trials Regulation (EU) No 536/2014,
which replaced the Clinical Trials Directive 2001/20/EC on January&#160;31, 2022, a single application is now made through the Clinical
Trials Information System for clinical trial authorization in up to 30 EU/EEA countries at the same time and with a single set of documentation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The assessment of applications
for clinical trials is divided into two parts (Part&#160;I contains scientific and medicinal product documentation and Part&#160;II contains
the national and patient-level documentation). Part&#160;I is assessed by a coordinated review by the competent authorities of all European
Union member states (the &#8220;Member States&#8221;) in which an application for authorization of a clinical trial has been submitted
(Member States concerned) of a draft report prepared by a reference Member State. Part&#160;II is assessed separately by each Member State
concerned. The role of the relevant ethics committees in the assessment procedure continues to be governed by the national law of the
Member State concerned, however overall related timelines are defined by the Clinical Trials Regulation. The Clinical Trials Regulation
also provides for simplified reporting procedures for clinical trial sponsors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, whether or not
we obtain FDA approval for a product, we must obtain approval of a product by the comparable regulatory authorities of countries outside
the United&#160;States before we can commence marketing of the product in those countries. The approval process and requirements vary
from country to country, so the number and type of nonclinical, clinical, and manufacturing studies needed may differ, and the time may
be longer or shorter than that required for FDA approval.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">To obtain regulatory approval
of our medicinal products under the European Union regulatory system, we are required to submit a marketing authorization application
(&#8220;MAA&#8221;), to be assessed in the centralized procedure. The centralized procedure allows applicants to obtain a marketing authorization
(&#8220;MA&#8221;) that is valid throughout the European Union, and the additional Member States of the European Economic Area (Iceland,
Liechtenstein and Norway) (&#8220;EEA&#8221;). It is compulsory for medicinal products manufactured using biotechnological processes,
orphan medicinal products, advanced therapy medicinal products (gene-therapy, somatic cell-therapy or tissue-engineered medicines) and
medicinal products containing a new active substance which is not authorized in the European Union and which is intended for the treatment
of HIV, AIDS, cancer, neurodegenerative disorders, auto-immune and other immune dysfunctions, viral diseases or diabetes. The centralized
procedure is optional for any other products containing new active substances not authorized in the European Union or for products which
constitute a significant therapeutic, scientific, or technical innovation or for which a centralized authorization is in the interests
of patients at European Union level. When a company wishes to place on the market a medicinal product that is eligible for the centralized
procedure, it sends an application directly to the EMA, to be assessed by the Committee for Medicinal Products for Human Use (&#8220;CHMP&#8221;).
The CHMP is responsible for conducting the assessment of whether a medicine meets the required quality, safety, and efficacy requirements,
and whether the product has a positive risk/benefit profile. The procedure results in a European Commission decision, which is valid in
all European Union Member States. The centralized procedure is as follows: full copies of the MAA are sent to a rapporteur and a co-rapporteur
designated by the competent European Medicines Agency (&#8220;EMA&#8221;) scientific committee. They coordinate the EMA&#8217;s scientific
assessment of the medicinal product and prepare draft reports. Once the draft reports are prepared (other experts might be called upon
for this purpose), they are sent to the CHMP, whose comments or objections are communicated to the applicant. The rapporteur is therefore
the privileged interlocutor of the applicant and continues to play this role, even after the MA has been granted.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The rapporteur and co-rapporteur
then assess the applicant&#8217;s replies, submit them for discussion to the CHMP, and taking into account the conclusions of this debate,
prepare a final assessment report. Once the evaluation is completed, the CHMP gives a favorable or unfavorable opinion as to whether to
grant the authorization. When the opinion is favorable, it shall include the draft summary of product characteristics (&#8220;SmPC&#8221;),
the package leaflet, and the texts proposed for the various packaging materials. The time limit for the evaluation procedure is 210&#160;days
(excluding clock stops, when additional written or oral information is to be provided by the applicant in response to questions asked
by the CHMP). The EMA then has fifteen&#160;days to forward its opinion to the European Commission, which will make a binding decision
on the grant of an MA within 67&#160;days of the receipt of the CHMP opinion.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">National marketing authorizations,
which are issued by the competent authorities of the Member States of the European Union and only cover their respective territory, are
available for products not falling within the mandatory scope of the centralized procedure. Where a product has already been authorized
for marketing in a Member State of the European Union, this national authorization can be recognized in other Member States through the
mutual recognition procedure. If the product has not received a national authorization in any Member State at the time of application,
it can be approved simultaneously in various Member States through the decentralized procedure.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In the European Union, new
chemical entities (including both small molecules and biological medicinal products) approved on the basis of a complete and independent
data package qualify for eight years of data exclusivity upon marketing authorization and an additional two years of market exclusivity.
Data exclusivity, if granted, prevents generic or biosimilar applicants from referencing the innovator&#8217;s pre-clinical and clinical
trial data contained in the dossier of the reference product when applying for a generic or biosimilar MA, for a period of eight years
from the date on which the reference product was first authorized in the European Union. During the additional two-year period of market
exclusivity, a generic or biosimilar MAA can be submitted, and the innovator&#8217;s data may be referenced, but no medicinal product
can be marketed until the expiration of the market exclusivity. The overall ten-year period will be extended to a maximum of eleven years
if, during the first eight years of those ten years, the MA holder obtains an authorization for one or more new therapeutic indications
which, during the scientific evaluation prior to authorization, is held to bring a significant clinical benefit in comparison with currently
approved therapies. There is no guarantee that a product will be considered by the EMA to be a new chemical entity, and products may not
qualify for data exclusivity. Even if a product is considered to be a new chemical entity so that the innovator gains the prescribed period
of data exclusivity, another company could nevertheless also market another version of the product if such company obtained an MA based
on an MAA with a complete and independent data package of pharmaceutical tests, preclinical tests and clinical trials.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The criteria for designating
an &#8220;orphan medicinal product&#8221; in the European Union are similar in principle to those in the United&#160;States. Under Article&#160;3
of Regulation (EC) 141/2000, a medicinal product may be designated as an orphan medicinal product if it is intended for the diagnosis,
prevention, or treatment of a life-threatening or chronically debilitating condition that affects no more than five in 10,000 persons
in the European Union when the application is made. In addition, orphan designation can be granted if the product is intended for a life
threatening, seriously debilitating, or serious and chronic condition in the European Union and, without incentives, it is unlikely that
sales of the product in the European Union would be sufficient to justify the necessary investment in its development. Orphan designation
is only available if there is no other satisfactory method approved in the European Union of diagnosing, preventing, or treating the applicable
orphan condition, or if such a method exists, the proposed orphan medicinal product will be of significant benefit to patients affected
by such condition, as defined in Regulation (EC) 847/2000.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Orphan designation provides
opportunities for fee reductions, protocol assistance, and access to the centralized procedure. Fee reductions are limited to the first
year after an MA, except for small and medium enterprises. In addition, if a product which has an orphan designation subsequently receives
a centralized MA for the indication for which it has such designation, the product is entitled to orphan market exclusivity, which means
the EMA may not approve any other application to market a similar medicinal product for the same indication for a period of ten&#160;years.
A &#8220;similar medicinal product&#8221; is defined as a medicinal product containing a similar active substance or substances as contained
in an authorized orphan medicinal product, and which is intended for the same therapeutic indication. The exclusivity period may be reduced
to six&#160;years if, at the end of the fifth year, it is shown that the designation criteria are no longer met, including where it is
shown that the product is sufficiently profitable not to justify maintenance of market exclusivity. Additionally, an MA may be granted
to a similar medicinal product for the same indication as an authorized orphan product at any time if:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the second applicant can establish that its product, although similar to the authorized product, is safer, more effective or otherwise clinically superior;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">A pediatric investigation
plan (&#8220;PIP&#8221;) in the European Union is aimed at ensuring that the necessary data are obtained to support the authorization
of a medicine for children, through studies in children. All applications for MAs for new medicines have to include the results of studies
as described in an agreed PIP, unless the medicine is exempt because of a deferral or waiver. This requirement also applies when an MA
holder wants to add a new indication, pharmaceutical form, or route of administration for a medicine that is already authorized and covered
by intellectual property rights. Several rewards and incentives for the development of pediatric medicines for children are available
in the European Union. Medicines authorized across the European Union with the results of studies from a PIP included in the product information
are eligible for an extension of their supplementary protection certificate (&#8220;SPC&#8221;) by six&#160;months (provided an application
for such extension is made at the same time as filing the SPC application for the product, or at any point up to two&#160;years before
the SPC expires). This is the case even when the studies&#8217; results are negative. For orphan medicinal products, the incentive is
an additional two&#160;years of market exclusivity. Scientific advice and protocol assistance at the EMA are free of charge for questions
relating to the development of pediatric medicines. Medicines developed specifically for children that are already authorized but are
not protected by a patent or supplementary protection certificate are eligible for a pediatric-use MA (&#8220;PUMA&#8221;). If a PUMA
is granted, the product will benefit from ten&#160;years of market protection as an incentive.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In March&#160;2016, the EMA
launched an initiative, the PRIority MEdicines (&#8220;PRIME&#8221;) scheme, to facilitate development of product candidates in indications,
often rare, for which few or no therapies currently exist. The PRIME scheme is intended to encourage development of products in areas
of unmet medical need and provides accelerated assessment of products representing substantial innovation reviewed under the centralized
procedure. Products from small- and medium-sized enterprises may qualify for earlier entry into the PRIME scheme than larger companies
on the basis of compelling non-clinical data and tolerability data from initial clinical trials. Many benefits accrue to sponsors of product
candidates with PRIME designation, including but not limited to, early and proactive regulatory dialogue with the EMA, frequent discussions
on clinical trial designs and other development program elements, and potentially accelerated MAA assessment once a dossier has been submitted.
Importantly, once a candidate medicine has been selected for the PRIME scheme, a dedicated contact and rapporteur from the CHMP or from
the Committee for Advanced Therapies (&#8220;CAT&#8221;) are appointed early in the PRIME scheme facilitating increased understanding
of the product at EMA&#8217;s committee level. An initial meeting with the CHMP/CAT rapporteur initiates these relationships and includes
a team of multidisciplinary experts at the EMA to provide guidance on the overall development and regulatory strategies. PRIME eligibility
does not change the standards for product approval, and there is no assurance that any such designation or eligibility will result in
expedited review or approval.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The aforementioned European
Union rules are generally applicable in the EEA.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The European Commission introduced
legislative proposals in April 2023 that, if implemented, will replace the current regulatory framework in the European Union for all
medicines (including those for rare diseases and for children). The European Commission has provided the legislative proposals to the
European Parliament and the European Council for their review and approval. In October 2023, the European Parliament published draft reports
proposing amendments to the legislative proposals, which will be debated by the European Parliament. Once the European Commission&#8217;s
legislative proposals are approved (with or without amendment), they will be adopted into European Union law.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The United Kingdom left the
European Union on January&#160;31, 2020, and the United Kingdom and the European Union have concluded a trade and cooperation agreement
(&#8220;TCA&#8221;) which was provisionally applicable since January&#160;1, 2021 and has been formally applicable since May&#160;1, 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The TCA includes specific
provisions concerning pharmaceuticals, which include the mutual recognition of GMP, inspections of manufacturing facilities for medicinal
products and GMP documents issued, but does not provide for wholesale mutual recognition of United Kingdom and European Union pharmaceutical
regulations. At present, Great Britain has implemented European Union legislation on the marketing, promotion and sale of medicinal products
through the Human Medicines Regulations 2012 (as amended). Except in respect of the European Union Clinical Trials Regulation, the regulatory
regime in Great Britain therefore largely aligns with current European Union medicines regulations, however it is possible that these
regimes will diverge more significantly in future now that Great Britain&#8217;s regulatory system is independent from the European Union
and the TCA does not provide for mutual recognition of United Kingdom and European Union pharmaceutical legislation. However, notwithstanding
that there is no wholesale recognition of European Union pharmaceutical legislation under the TCA, under a new framework mentioned below
which was put in place by the Medicines and Healthcare products Regulatory Agency (&#8220;MHRA&#8221;), the United Kingdom&#8217;s medicines
regulator, on January&#160;1, 2024, the MHRA may take into account decisions on the approval of MAs from the EMA (and certain other regulators)
when considering an application for a Great Britain MA.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On February&#160;27, 2023,
the United Kingdom government and the European Commission announced a political agreement in principle to replace the Northern Ireland
Protocol (the &#8220;Northern Ireland Protocol&#8221;) with a new set of arrangements, known as the &#8220;Windsor Framework&#8221;. This
new framework fundamentally changes the existing system under the Northern Ireland Protocol, including with respect to the regulation
of medicinal products in the United Kingdom. In particular, the MHRA will be responsible for approving all medicinal products destined
for the United Kingdom market (i.e., Great Britain and Northern Ireland), and the EMA will no longer have any role in approving medicinal
products destined for Northern Ireland. A single United Kingdom-wide MA will be granted by the MHRA for all medicinal products to be sold
in the United Kingdom, enabling products to be sold in a single pack and under a single authorization throughout the United Kingdom. The
Windsor Framework was approved by the European Union-United Kingdom Joint Committee on March&#160;24, 2023, so the United Kingdom government
and the European Union will enact legislative measures to bring it into law. On June 9, 2023, the MHRA announced that the medicines aspects
of the Windsor Framework will apply from January 1, 2025.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The MHRA has introduced changes
to national licensing procedures, including procedures to prioritize access to new medicines that will benefit patients, an accelerated
assessment procedure and new routes of evaluation for novel products and biotechnological products. On January 1, 2024, the MHRA put in
place a new international recognition framework under which the MHRA may have regard to decisions on the approval of MAs made by the EMA
and certain other regulators when determining an application for a new Great Britain MA.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">There is now no pre-MA orphan
designation in Great Britain. Instead, the MHRA reviews applications for orphan designation in parallel to the corresponding MAA.&#160;The
criteria are essentially the same, but have been tailored for the Great Britain market, i.e., the prevalence of the condition in Great
Britain (rather than the European Union) must not be more than five in 10,000. Should an orphan designation be granted, the period or
market exclusivity will be set from the date of first approval of the product in Great Britain or the European Union, wherever is earliest.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Healthcare Laws and Regulations</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Sales of our product candidate,
if approved, or any other future product candidate, will be subject to healthcare regulation and enforcement by the federal government
and the states and foreign governments in which we might conduct our business. The healthcare laws and regulations that may affect our
ability to operate include the following:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The federal Anti-Kickback Statute makes it illegal for any person or entity to knowingly and willfully, directly or indirectly, solicit, receive, offer, or pay any remuneration that is in exchange for or to induce the referral of business, including the purchase, order, lease of any good, facility, item or service for which payment may be made under a federal healthcare program, such as Medicare or Medicaid. The term &#8220;remuneration&#8221; has been broadly interpreted to include anything of value;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Federal false claims, and false statement laws, including the federal civil False Claims Act, and Civil Monetary Penalties Law, prohibits, among other things, any person or entity from knowingly presenting, or causing to be presented, for payment to, or approval by, federal programs, including Medicare and Medicaid, claims for items or services, including drugs and biologics, that are false or fraudulent;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Health Insurance Portability and Accountability Act of 1996 (&#8220;HIPAA&#8221;) created additional federal criminal statutes that prohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors or making any false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and their implementing regulations, imposes obligations on certain covered healthcare providers, health plans, and healthcare clearinghouses and their respective business associates and covered subcontractors types of individuals and entities regarding the electronic exchange of information in common healthcare transactions, as well as standards relating to the privacy and security of individually identifiable health information;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The federal Physician Payments Sunshine Act requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children&#8217;s Health Insurance Program, with specific exceptions, to report annually to the Centers for Medicare and Medicaid Services (&#8220;CMS&#8221;), information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified nurse anesthetists and certified nurse-midwives and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members.; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The Foreign Corrupt Practices Act (&#8220;FCPA&#8221;) prohibits U.S. businesses and their representatives from offering to pay, paying, promising to pay or authorizing the payment of money or anything of value to a foreign official in order to influence any act or decision of the foreign official in his or her official capacity or to secure any other improper advantage in order to obtain or retain business.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Many states have similar
laws and regulations, such as anti-kickback and false claims laws, that may be broader in scope and may apply regardless of payor, in
addition to items and services reimbursed under Medicaid and other state programs. Additionally, we may be subject to state laws that
require pharmaceutical companies to comply with the federal government&#8217;s and/or pharmaceutical industry&#8217;s voluntary compliance
guidelines, state laws that require drug and biologics manufacturers to report information related to payments and other transfers of
value to physicians and other healthcare providers or marketing expenditures, as well as state and foreign laws governing the privacy
and security of health information, many of which differ from each other in significant ways and often are not preempted by HIPAA.&#160;Additionally,
to the extent that our product is sold in a foreign country, we may be subject to similar foreign laws.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Pharmaceutical Coverage, Pricing and Reimbursement</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Significant uncertainty exists
as to the coverage and reimbursement status of any product candidates for which we obtain regulatory approval. In the United&#160;States
and markets in other countries, sales of any products for which we receive regulatory approval for commercial sale will depend, in part,
on the extent to which third-party payors provide coverage, and establish adequate reimbursement levels for such drug products. In the
United&#160;States, third-party payors include federal and state healthcare programs, government authorities, private managed care providers,
private health insurers and other organizations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Third-party payors are increasingly
challenging the price, examining the medical necessity and reviewing the cost-effectiveness of medical drug products and medical services,
in addition to questioning their safety and efficacy. Such payors may limit coverage to specific drug products on an approved list, also
known as a formulary, which might not include all of the FDA-approved drugs for a particular indication. We may need to conduct expensive
pharmaco-economic studies in order to demonstrate the medical necessity and cost-effectiveness of our products, in addition to the costs
required to obtain the FDA approvals. Nonetheless, our product candidates may not be considered medically necessary or cost-effective.
Moreover, the process for determining whether a third-party payor will provide coverage for a drug product may be separate from the process
for setting the price of a drug product or for establishing the reimbursement rate that such a payor will pay for the drug product. A
payor&#8217;s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Further,
one payor&#8217;s determination to provide coverage for a drug product does not assure that other payors will also provide coverage for
the drug product. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize
an appropriate return on our investment in product development.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The marketability of any
product candidates for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail
to provide adequate coverage and reimbursement. In addition, emphasis on managed care in the United&#160;States has increased and could
increase the pressure on pharmaceutical pricing. Coverage policies and third-party reimbursement rates may change at any time. Even if
favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable
coverage policies and reimbursement rates may be implemented in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i>&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Healthcare Reform</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The United&#160;States and
many foreign jurisdictions have enacted or proposed legislative and regulatory changes affecting the healthcare system. The United&#160;States
government, state legislatures and foreign governments also have shown significant interest in implementing cost-containment programs
to limit the growth of government-paid healthcare costs, including price controls, restrictions on reimbursement, and requirements for
substitution of generic products for branded prescription drugs and biologics. In recent&#160;years, Congress has considered reductions
in Medicare reimbursement levels for drugs and biologics administered by physicians. CMS, the agency that administers the Medicare and
Medicaid programs, also has authority to revise reimbursement rates and to implement coverage restrictions for some drugs and biologics.
Cost reduction initiatives and changes in coverage implemented through legislation or regulation could decrease utilization of and reimbursement
for any approved products. While Medicare regulations apply only to drug benefits for Medicare beneficiaries, private payors often follow
Medicare coverage policy and payment limitations in setting their own reimbursement rates. Therefore, any reduction in reimbursement that
results from federal legislation or regulation may result in a similar reduction in payments from private payors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Affordable Care Act substantially
changed the way healthcare is financed by both governmental and private insurers, and significantly impacts the pharmaceutical industry.
The Affordable Care Act is intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance
remedies against healthcare fraud and abuse, add new transparency requirements for healthcare and health insurance industries, impose
new taxes and fees on pharmaceutical and medical device manufacturers, and impose additional health policy reforms. Among other things,
the Affordable Care Act expanded manufacturers&#8217; rebate liability under the Medicaid Drug Rebate Program by increasing the minimum
Medicaid rebate for both branded and generic drugs and biologics, expanded the 340B program, and revised the definition of average manufacturer
price (&#8220;AMP&#8221;), which could increase the amount of Medicaid drug rebates manufacturers are required to pay to states. The legislation
also extended Medicaid drug rebates, previously due only on fee-for-service Medicaid utilization, to include the utilization of Medicaid
managed care organizations as well and created an alternative rebate formula for certain new formulations of certain existing products
that is intended to increase the amount of rebates due on those drugs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Other legislative changes
have been proposed and adopted since passage of the Affordable Care Act. The Budget Control Act&#160;of&#160;2011, among other things,
included automatic reductions to several government programs, including aggregate reductions to Medicare payments to healthcare providers
of up to 2.0% per fiscal year, which went into effect in April&#160;2013 and will remain in effect through 2031. The American Taxpayer
Relief Act was signed into law, which, among other things, reduced Medicare payments to several types of providers, including hospitals,
imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments
to providers from three to five&#160;years.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">There have been executive,
judicial and congressional challenges to the Affordable Care Act. We cannot predict what additional challenges to the Affordable Care
Act may arise in the future, the outcome thereof, or the impact any such actions may have on our business. Additionally, the Biden administration
has introduced various measures in recent&#160;years, focusing on healthcare and medical-product pricing, in particular. It remains to
be seen how these measures will affect our business and there is uncertainty as to what other healthcare programs and regulations may
be implemented or changed at the federal and/or state level in the U.S., but it is possible that such initiatives could have an adverse
effect on our ability to obtain FDA approval or clearance and/or successfully commercialize products in the U.S.&#160;in the future. For
example, any changes that reduce, or impede the ability of healthcare providers to obtain reimbursement for medical procedures in which
the products we currently, or intend to, commercialize are used, or that reduce medical procedure volumes, could adversely affect our
operations and/or future business plans. The financial impact of U.S.&#160;healthcare reform legislation over the next few&#160;years
will depend on a number of factors, including the policies reflected in implementing regulations and guidance and changes in sales volumes
for medical devices affected by the legislation. From time to time, legislation is drafted, introduced, and passed that could significantly
change the statutory provisions governing coverage, reimbursement, pricing, and marketing of medical device products. In addition, third-party
payor coverage and reimbursement policies are often revised or interpreted in ways that may significantly affect our business and our
products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Further legislative and regulatory
changes under the Affordable Care Act remain possible, and it is unknown what form any such changes or any law would take, and how or
whether it may affect our business in the future. We expect that changes or additions to the Affordable Care Act, the Medicare and Medicaid
programs, changes allowing the federal government to directly negotiate drug prices, and changes stemming from other healthcare reform
measures, especially with regard to healthcare access, financing or other legislation in individual states, could have a material adverse
effect on the healthcare industry.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Affordable Care Act requires
pharmaceutical manufacturers of branded prescription drugs and biologics to pay a branded prescription drug fee to the federal government.
Each individual pharmaceutical manufacturer pays a prorated share of the branded prescription drug fee, based on the dollar value of its
branded prescription drug sales to certain federal programs identified in the law. Furthermore, the law requires manufacturers to provide
a 50% discount (increased by subsequent legislation to a 70% discount) off the negotiated price of prescriptions filled by beneficiaries
in the Medicare Part&#160;D coverage gap, referred to as the &#8220;donut hole.&#8221; The Inflation Reduction Act&#160;of&#160;2022 (&#8220;IR
Act&#8221;) includes several provisions that may impact our business to varying degrees. The IR Act also includes provisions that reduce
the out-of-pocket spending cap for Medicare Part&#160;D beneficiaries from $7,050 to $2,000 starting in 2025, thereby effectively eliminating
the donut hole. Pharmaceutical manufacturers will be required to provide a 10% discount of all biosimilar and brand name prescription
drugs covered under the Medicare Part&#160;D plan benefit during the initial coverage period before the beneficiary reaches the $2,000
out-of-pocket spending cap. Once the patient reaches the out-of-pocket spending cap, they enter catastrophic coverage and drug manufacture
liability for biosimilar and brand name drugs increases to 20%. Furthermore, the IR Act allows the U.S.&#160;government to negotiate Medicare
Part&#160;B and Part&#160;D price caps for certain high-cost drugs and biologics without generic or biosimilar competition; requires companies
to pay rebates to Medicare for certain drug prices that increase faster than inflation; and delays until January&#160;1, 2032 the implementation
U.S.&#160;Department of Health and Human Service (&#8220;HHS&#8221;) rebate rule that would have limited the fees that pharmacy benefit
managers can charge.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Affordable Care Act
also expanded the Public Health Service&#8217;s 340B drug pricing program, which requires participating manufacturers to agree to charge
statutorily defined covered entities no more than the 340B &#8220;ceiling price&#8221; for the manufacturer&#8217;s covered outpatient
drugs. The Affordable Care Act expanded the 340B program to include additional types of covered entities: certain freestanding cancer
hospitals, critical access hospitals, rural referral centers, and sole community hospitals, each as defined by the Affordable Care Act.
Because the 340B ceiling price is determined based on AMP and Medicaid drug rebate data, revisions to the Medicaid rebate formula and
AMP definition could cause the required 340B discounts to increase.</p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The American Rescue Plan
Act&#160;of&#160;2021 eliminated the statutory Medicaid drug rebate cap, previously set at 100% of a drug&#8217;s AMP, for single source
and innovator multiple source drugs, beginning January&#160;1, 2024. Payment methodologies may be subject to changes in healthcare legislation
and regulatory initiatives as well. For example, CMS may develop new payment and delivery models, such as bundled payment models.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Recently, there has been
heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products. Such scrutiny has resulted
in several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things,
bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the cost of
drugs under Medicare, and reform government program reimbursement methodologies for pharmaceutical products.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">At the state level, legislatures
have increasingly passed legislation and implemented regulations designed to control pharmaceutical product pricing, including price or
patient reimbursement constraints, discounts, restrictions on certain product access, and marketing cost disclosure and transparency measures,
and in some cases, designed to encourage importation from other countries and bulk purchasing.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We expect that additional
federal, state, and foreign healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal
and state governments will pay for healthcare products and services, which could result in limited coverage and reimbursement and reduced
demand for our products, once approved, or additional pricing pressures.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Employees and Human Capital Resources </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">As of December 2, 2024, we
had [six] full-time employees, all are conducting Research and Development. Our employees are not represented by labor unions or covered
by collective bargaining agreements and we consider our relationship with our employees to be good.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Compensation and Benefits</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our employee-related objectives
include, as applicable, identifying, recruiting, retaining, and incentivizing our management team and our clinical, scientific and other
employees and consultants. The principal purposes of our equity and cash incentive plans are to attract, retain and motivate personnel
through the granting of stock-based and cash-based compensation awards, in order to align our interests and the interests of our stockholders
with those of our employees and consultants. In addition, all of our employees are eligible for health insurance, paid and unpaid leaves
including paid parental leave, a retirement plan, life and disability/accident coverage, and parking or commuter assistance and an employee
assistance.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Corporate Information</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We were incorporated under
the laws of the state of Delaware on October 2, 2020 under the name Phoenix Biotech Acquisition Corporation. Legacy CERo was incorporated
under the laws of the state of Delaware on September 23, 2016. On February 14, 2024, we consummated a merger with Legacy CERo and subsequently
changed our name to &#8220;CERo Therapeutics Holdings, Inc.&#8221; Our corporate headquarters are currently located at 210 Haskins Way,
Suite 230, South San Francisco, California 94080, and our telephone number is (215) 731-9450. Our website is <i>www.cero.bio</i>. The
information on our website is not incorporated by reference in this filing or in any other filings we make with the SEC.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Available Information </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our internet address is <i>www.cero.bio</i>.
Our investor relations website is located at <i>www.cero.bio/investors</i>. We make available free of charge on our investor relations
website under &#8220;SEC Filings&#8221; our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K,
our directors&#8217; and officers&#8217; Section 16 reports and any amendments to those reports as soon as reasonably practicable after
filing or furnishing such materials to the SEC. They are also available for free on the SEC&#8217;s website at <i>www.sec.gov</i>.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We use our investor relations
website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.
Investors should monitor such website, in addition to following our press releases, SEC filings and public conference calls and webcasts.
Information relating to our corporate governance is also included on our investor relations website. The information in or accessible
through the SEC and our website are not incorporated into, and are not considered part of, this filing.</p><div>

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</div><div><a id="a_015"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF PBAX</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>The following discussion
and analysis of PBAX&#8217;s financial condition and results of operations should be read in conjunction with our audited consolidated
financial statements and the notes related thereto appearing at the end of this prospectus. Certain information contained in the discussion
and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those anticipated in these
forward-looking statements as a result of many factors, including those set forth under &#8220;Cautionary Note Regarding Forward-Looking
Statements,&#8221; &#8220;Risk Factors&#8221; and elsewhere in this prospectus. All references herein to &#8220;we,&#8221; &#8220;us,&#8221;
or &#8220;our&#8221; in this section refer to Phoenix Biotech Acquisition Corp. prior to consummation of the Business Combination and
to CERo Therapeutics Holdings, Inc. and its consolidated subsidiaries following the consummation of the Business Combination.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Overview</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 14.55pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We are a blank check company
incorporated in Delaware on June&#160;8, 2021. We were formed for the purpose of effecting a merger, capital stock exchange, asset acquisition,
stock purchase, reorganization or similar business combination with one or more target businesses, using cash from the proceeds of our
Initial Public Offering and the sale of the Private Placement Units (as defined below) that occurred simultaneously with the completion
of our Initial Public Offering, our capital stock, debt or a combination of cash, stock and debt.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 14.55pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We incurred significant costs
in the pursuit of a business combination. As described below, the Business Combination was consummated on February 14, 2024, after the
date of the audited consolidated financial statements included elsewhere in this prospectus.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Recent Developments</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 14.55pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On January 3, 2024, we held
a special meeting of stockholders (the &#8220;Third Special Meeting&#8221;). At the Third Special Meeting, our stockholders approved a
proposal to amend the Investment Management Trust Agreement (the &#8220;IMTA&#8221;), dated as of October 5, 2021, as amended by the Amendment
No. 1 dated December 20, 2022 and Amendment No. 2 dated July 7, 2023, by and between us and Continental Stock Transfer and Trust Company
(&#8220;Continental&#8221;), to extend the business combination period up to three times for one month each time from January 8, 2024
to February 8, 2024, March 8, 2024 or April 8, 2024 (the &#8220;Third IMTA Amendment&#8221;). On January 3, 2024, we entered into the
Third IMTA Amendment with Continental. Our stockholders also approved an amendment (the &#8220;Third Charter Amendment&#8221;) to our
amended and restated certificate of incorporation, as amended by the First Amendment dated December 20, 2022 and the Second Amendment
dated July 7, 2023 (as amended by the Third Charter Amendment, the &#8220;PBAX Charter&#8221;) the to provide its board of directors the
ability to extend the date by which we have to consummate a business combination up to three times for one month each time, for a maximum
of three additional months. On January 3, 2024, we filed the Third Charter Amendment with the Secretary of State of the State of Delaware,
which was subsequently corrected by a Certificate of Correction (the &#8220;Certificate of Correction&#8221;) dated January 4, 2024 to
correct certain scrivener&#8217;s errors in the Third Charter Amendment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In connection with the approval
of the Third Charter Amendment, holders of 11,625 shares of our Class A Common Stock, exercised redemption rights. As a result, following
satisfaction of such redemptions, we had 6,234,582 shares of Class A Common Stock outstanding, of which (i) 753,332 were shares of Class
A Common Stock issued to the public in our Initial Public Offering, which shares of Class A Common Stock were entitled to receive a pro
rata portion of the remaining funds in our trust account (the &#8220;Trust Account&#8221;) in connection with our initial business combination,
a liquidation or certain other events, (ii) 4,596,250 were shares of Class A common stock issued upon the conversion of an equal number
of shares of our Class B common stock, par value $0.0001 per share (&#8220;Class B Common Stock&#8221;), acquired by the Sponsor prior
to our Initial Public Offering, which shares of Class A Common Stock did not have redemption rights, and (iii) 885,000 were shares of
Class A Common Stock included in the Private Placement Units acquired in the private placement by the Sponsor and other investors concurrent
with our Initial Public Offering, which shares of Class A Common Stock did not have redemption rights.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On January 4, 2024, the Sponsor
deposited $22,600 in the Trust Account in connection with the extension of the business combination deadline. On January 4, 2024, we made
a series of payments of an aggregate of $128,133 to holders of redeemed Class A Common Stock (an aggregate of $11.02 per redeemed share).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On February 5, 2024, the
parties entered into Amendment No. 1 to the Business Combination Agreement to, among other things, (i) remove the minimum cash condition,
(ii) modify the stock-price based milestones such that (a) the trading price condition for the First Level Earnout Target (as defined
in the Business Combination Agreement) shall be reset from $12.50 to 125% of the conversion price of the Series A Preferred Stock upon
the reset of such conversion price and (b) the trading price condition for the Second Level Earnout Target shall be reset from $15.00
to 150% of the conversion price of the Series A Preferred Stock upon reset of such conversion price, and (iii) increase the aggregate
number of shares of Class A Common Stock issuable to the stockholders of CERo in connection with the Business Combination from 4,651,704
shares to 5,000,000 shares. Such number of shares is in addition to up to 1,200,000 shares issuable upon satisfaction of certain earn-out
conditions and 382,651 shares issuable upon exercise of rollover options or warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On February 8, 2024, we held
a special meeting of stockholders (the &#8220;Fourth Special Meeting&#8221;). At the Fourth Special Meeting, our stockholders adopted
and approved: (i) the Business Combination Agreement, pursuant to which Merger Sub merged with and into Legacy CERo, with Legacy CERo
surviving the merger as a wholly-owned subsidiary of PBAX and approved the Business Combination and the other transactions and ancillary
documents contemplated by and required for the Business Combination; (ii) on a non-binding advisory basis, certain changes to the PBAX
Charter, including the name change to CERo Therapeutics Holdings, Inc., share authorizations, and others; (iii) the issuance of Class
A Common Stock to Legacy CERo Stockholders pursuant to the Business Combination Agreement; (iv) the election of five directors; and (v)
the 2024 Equity Incentive Plan and the 2024 Employee Stock Purchase Plan, contingent of the consummation of the Business Combination.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In connection with the approval
of the Business Combination, holders of 671,285 shares of Class A Common Stock, exercised redemption rights. As a result, following satisfaction
of such redemptions, we had 5,563,297 shares of Class A Common Stock outstanding, of which (i) 82,047 were shares of Class A Common Stock
issued to the public in our Initial Public Offering, which shares of Class A Common Stock were entitled to receive a pro rata portion
of the remaining funds in our Trust Account in connection with its initial business combination, a liquidation or certain other events,
(ii) 4,596,250 were shares of Class A Common Stock issued upon the conversion of an equal number of shares of our Class B Shares acquired
by Sponsor prior to our Initial Public Offering, which shares of Class A Common Stock did not have redemption rights, and (iii) 885,000
were shares of Class A Common Stock included in the Private Placement Units acquired in the private placement by the Sponsor and other
investors concurrent with our Initial Public Offering, which shares of Class A Common Stock did not have redemption rights. On February
14, 2024, we made a series of payments of an aggregate of $7,456,463.30 to holders of redeemed Class A Common Stock (an aggregate of $11.11
per redeemed share).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On February 13, 2024, the
parties entered into Amendment No. 2 to the Business Combination Agreement to create two additional pools of earnout shares of class A
common stock, one pool of which contained 875,000 shares, which were fully vested at closing of the Business Combination and which were
issued as an offset to the agreement by Sponsor to forfeit an offsetting number of shares, and one pool of which will contain 1,000,000
shares, which will be fully vested upon the achievement of certain regulatory milestone-based earnout targets and make certain other technical
changes to the timing and process for issuance of the 1,200,000 shares of Class A Common Stock subject to the other earn-out conditions
set forth in the Business Combination Agreement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On February 14, 2024, the
Business Combination between Legacy CERo and PBAX was consummated pursuant to the Business Combination Agreement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">At the effective time of
the Business Combination, (i) each outstanding share of Legacy CERo common stock, (the &#8220;Legacy CERo common stock&#8221;), was cancelled
and converted into the right to receive shares of Class A Common Stock; (ii) each outstanding option to purchase Legacy CERo common stock
was converted into an option to purchase shares of Class A Common Stock; (iii) each outstanding share of CERo preferred stock, was converted
into the right to receive shares of Class A Common Stock, and (iv) each outstanding warrant to purchase Legacy CERo warrants was converted
into a warrant to acquire shares of Class A Common Stock. In addition, each outstanding Legacy CERo convertible bridge note was exchanged
for shares of Series A Preferred Stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, the holders
of Legacy CERo common stock and Legacy CERo preferred stock have the contingent right to receive additional shares of Class A Common Stock
(the &#8220;Earnout Shares&#8221;). At the Closing we issued three pools of shares subject to forfeiture if the applicable conditions
to transferability thereof are not satisfied: (i) 1,200,000 shares of Class A Common Stock, which will be fully vested upon the achievement
of certain adjusted stock price-based earnout targets or upon a qualifying transaction (ii) 875,000 shares of Common Stock, pursuant to
a Letter Agreement, dated as of February 14, 2024 (the &#8220;Sponsor Share Forfeiture Agreement&#8221;) which were fully vested at Closing
of the Business Combination and which were issued as an offset to the Sponsor Share Forfeiture Agreement, and (iii) 1,000,000 shares of
Common Stock, which will be fully vested upon to achievement of certain regulatory milestone-based earnout targets.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">As consideration for the
Business Combination, we issued to Legacy CERo Stockholders an aggregate of 7,597,638 shares of Class A Common Stock, including 2,200,000
Earnout Shares and 382,651 shares issuable upon exercise of rollover options or warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On February 14, 2024, we
sold 10,039 shares of Series A Preferred Stock, 612,746 Series A Warrants and 2,500 Preferred Warrants pursuant to the First Securities
Purchase Agreement for aggregate cash proceeds of approximately $8.0 million, plus additional cash proceeds of $2.0 million on the mandatory
exercise of the Preferred Warrants upon the registration of the underlying shares of Common Stock. A portion of the issued Series A Preferred
Stock were issued as condition for extinguishment of indebtedness.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On February 14, 2024, we
entered into the Keystone Equity Financing with an investor which allows us to elect at our sole discretion to sell and issue, up to the
lesser of $25 million or a limit determined by maximum ownership percentages. As consideration for executing this agreement, we refunded
$1 million of the proceeds of the Series A financing to the investor and $150,000 to investor counsel.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On February 23, 2024, we
entered into the Arena Equity Financing with an investor which allows us to elect at our sole discretion to sell and issue, up to the
lesser of $25 million or a limit determined by maximum ownership percentages following the termination of the Keystone Equity Financing,
including as a result of the sale of the maximum amount permitted under such Keystone Equity Financing or the expiration of the Keystone
Equity Financing at the end of its three-year term. As consideration for executing this agreement, we will issue $500,000 of Common Stock
with a per share price determined by the five-day volume weighted average daily common share price on the five days preceding the effectiveness
of the registration statement that includes the shares pursuant to the purchase agreement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On April 1, 2024, we sold
626 shares of Series B Preferred Stock pursuant to the Second Securities Purchase Agreement for aggregate cash proceeds of approximately
$0.5 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Results of Operations</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">As of December 31, 2023,
we had not commenced any operations. All activity through December 31, 2023 relates to our formation, the Initial Public Offering, and
since the Initial Public Offering, the search for a prospective initial business combination. We will not generate any operating revenues
until after the completion of a business combination, at the earliest. We generate non-operating income in the form of interest income
from the proceeds derived from the Initial Public Offering placed in the Trust Account.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 14.55pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">For the year ended December
31, 2023, we had a net loss of $2,536,233, which primarily consists of operating expenses of $2,892,935 and Delaware franchise taxes of
$40,050, partially offset by the interest earned on marketable securities held in Trust Account of $491,571.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">For the year ended December
31, 2022, we had a net loss of $667,736, which primarily consists of operating expenses of $2,841,391 and Delaware franchise taxes of
$64,050, partially offset by the interest earned on marketable securities held in Trust Account of $2,836,864.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Liquidity and Going Concern</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On October&#160;8, 2021,
we consummated the Initial Public Offering of 17,500,000 units (&#8220;Units&#8221;), at a price of $10.00 per Unit, which included the
partial exercise by the underwriter of its over-allotment option in the amount of 2,000,000 Units, generating gross proceeds of $175,000,000.
Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 885,000 units (the &#8220;Private Placement
Units&#8221;) to the Sponsor, Cantor Fitzgerald &amp; Co. (&#8220;Cantor&#8221;) and Cohen &amp; Company Capital Markets, a division of
J.V.B. Financial Group, LLC (&#8220;CCM&#8221;), at a price of $10.00 per Private Placement Unit, generating gross proceeds of $8,850,000.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 14.55pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Following the Initial Public
Offering, the partial exercise of the over-allotment option and the sale of the Private Placement Units, a total of $178,500,000 was placed
in the Trust Account ($10.20 per Unit). We incurred $12,729,318 in transaction costs, including $2,635,000 of underwriting fees, $9,150,000
of deferred underwriting fees and $944,318 of other offering costs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 14.55pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">As of December 31, 2023,
we had $96,873 in our operating bank accounts, $8,436,311 in money market funds held in Trust Account to be used for a business combination
or to repurchase or redeem our Public Shares in connection therewith and a working capital deficit of $5,049,122.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 14.55pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">For the year ended December
31, 2023, there was $1,523,604 of cash used in operating activities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 14.55pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">For the year ended December
31, 2022, there was $1,092,247 of cash used in operating activities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We used substantially all
of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less taxes payable),
to complete our Business Combination, including the payment of transaction costs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 14.55pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In order to finance transaction
costs in connection with a business combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may,
but are not obligated to, loan us funds as may be required. If we complete a business combination, we may repay such loaned amounts out
of the proceeds of the Trust Account released to us. In the event that a business combination does not close, we may use a portion of
the working capital held outside the Trust Account to repay such loaned amounts, but no proceeds from our Trust Account would be used
for such repayment. Up to $1,500,000 of such loans may be converted into units of the post business combination entity, at a price of
$10.00 per unit, at the option of the lender. The units would be identical to the Private Placement Units. On December&#160;13, 2022,
we entered into a promissory note with the Sponsor. In order to fund ongoing operations, the Sponsor will loan up to $1,500,000 to us.
On December 8, 2023, the Promissory Note was amended to increase the aggregate amount from $1,500,000 to $1,600,00. As of December 31,
2023 and 2022, there was $1,555,000 and $650,000 of outstanding borrowings under the working capital loan arrangement, respectively. On
February 14, 2024, the Sponsor surrendered the Promissory Note to us in payment of its subscription price for Series A Preferred Stock
in the financing transaction described above.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our ability to continue as
a going concern is dependent on its ability to raise additional capital to fund its R&amp;D activities and meet its obligations on a timely
basis. Since inception, we have incurred net losses and operating cash flow deficits, resulting in an accumulated deficit of $43.3 million
as of December&#160;31, 2023. On February 14, 2024, we acquired the assets of CERo Therapeutics, Inc., closed the PIPE Financing with
gross proceeds of $9.8 million, and assumed the R&amp;D operations of Legacy CERo. Additional funds are necessary to maintain current
operations and to continue R&amp;D activities. However, there can be no assurance that sufficient funding will be available to allow us
to successfully continue its R&amp;D activities and planned regulatory filings with the FDA. If we are unable to obtain necessary funds,
significant reductions in spending and the delay or cancellation of planned activities may be necessary. These actions would have a material
adverse effect on our business, results of operations, and prospects. These conditions raise substantial doubt about our ability to continue
as a going concern within one year from the date these financial statements are issued. The accompanying financial statements do not include
any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities
that might result from the outcome of this uncertainty.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Contractual Obligations</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 14.55pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We do not have any long-term
debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay the Sponsor or an
affiliate of the Sponsor a monthly fee of $20,000 for office space, administrative and shared personnel support services to us. We began
incurring these fees on October&#160;6, 2021 and incurred these fees monthly through December&#160;31, 2022. The payment of these fees
was suspended on December&#160;31, 2022 and reinstated on March&#160;31, 2023. As of December 31, 2023, there was a $75,000 outstanding
balance owed to the Sponsor.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We entered into an agreement,
commencing on the date of our listing on Nasdaq, to pay the spouse of our Chief Executive Officer a monthly consulting fee of $15,000
for assisting us in identifying and evaluating potential acquisition targets. Payment of the consulting fees ended on December&#160;31,
2022 as part of the first charter amendment approval.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 14.55pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, we have an agreement
to pay the underwriter a deferred fee of $9,150,000. The deferred fee will become payable to the representative from the amounts held
in the Trust Account solely in the event that we complete a business combination, subject to the terms of the underwriting agreement.
Prior to Closing the Business Combination, we entered into a fee modification agreement with the underwriter, pursuant to which the underwriter
received shares of Common Stock in lieu of certain cash payments.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Critical Accounting Policies</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 14.55pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The preparation of financial
statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets
and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially
differ from those estimates. We have identified the following critical accounting policies:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Accounting for Public Warrants</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 14.55pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We account for Public Warrants
as either equity-classified or liability-classified instruments based on an assessment of the instruments&#8217; specific terms and applicable
authoritative guidance in ASC 480 and ASC 815, Derivatives and Hedging (&#8220;ASC 815&#8221;). The assessment considers whether the instruments
are free standing financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments
meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to our own Common
Stock and whether the instrument holders could potentially require &#8220;net cash settlement&#8221; in a circumstance outside of our
control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, was conducted
at the time of warrant issuance and as of each subsequent period end date while the instruments are outstanding. Management has concluded
that the Public Warrants issued pursuant to the warrant agreement qualify for equity accounting treatment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Common Stock Subject to Possible Redemption</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 14.55pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We account for our Common
Stock subject to possible redemption in accordance with the guidance in ASC Topic 480 &#8220;Distinguishing Liabilities from Equity.&#8221;
Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable
common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption
upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock
is classified as stockholders&#8217; equity. Our Common Stock features certain redemption rights that are considered to be outside of
our control and subject to occurrence of uncertain future events. Accordingly, Common Stock subject to possible redemption is presented
as temporary equity, outside of the stockholders&#8217; deficit section of our balance sheets. We recognize changes in redemption value
immediately as they occur and adjust the carrying value of redeemable common stock to equal the redemption value at the end of each reporting
period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital
and accumulated deficit.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Net Loss per Common Share</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 14.55pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Net loss per share is computed
by dividing net loss by the weighted average number of shares of common stock outstanding during the period. At December 31, 2023, we
did not have any dilutive securities and/or other contracts that could, potentially, be exercised or converted into shares of common stock
and then share in our earnings. As a result, diluted net loss per share is the same as basic net loss per share for the period presented.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Recent Accounting Standards</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 14.55pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In December 2023, the Financial
Accounting Standard Board (&#8220;FASB&#8221;) FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures
(&#8220;ASU 2023-09&#8221;), which requires disclosure of incremental income tax information within the rate reconciliation and expanded
disclosures of income taxes paid, among other disclosure requirements. ASU 2023-09 is effective for fiscal years beginning after December
15, 2024. Early adoption is permitted. Management does not believe the adoption of ASU 2023-09 will have a material impact on its consolidated
financial statements and disclosures.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In June 2016, the FASB issued
Accounting Standards Update (&#8220;ASU 2016-13&#8221;) <i>Financial Instruments&#160;&#8211; Credit Losses (Topic&#160;326): Measurement
of Credit Losses on Financial Instruments (&#8220;ASU 2016-13&#8221;)</i>. This update requires financial assets measured at amortized
cost basis to be presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant
information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect
the collectability of the reported amount. Since June 2016, the FASB issued clarifying updates to the new standard including changing
the effective date for smaller reporting companies. The guidance is effective for fiscal years beginning after December&#160;15, 2022,
and interim periods within those fiscal years, with early adoption permitted. We adopted ASU&#160;2016-13 on January&#160;1, 2023. The
adoption of ASU&#160;2016-13 did not have an impact on our financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 14.55pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Management does not believe
that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying
financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_016"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>MANAGEMENT&#8217;S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF CERO</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>The following Management&#8217;s
Discussion and Analysis of Financial Condition and Results of Operations provides information which CERo Therapeutics Holdings, Inc. (&#8220;the
Company&#8221;) management believes is relevant to an assessment and understanding of its results of operations and financial condition.
The discussion should be read together with </i>the Company<i>&#8217;s financial statements and related notes that are presented above.
This Management&#8217;s Discussion and Analysis of Financial Condition and Results of Operations may contain forward-looking statements
based upon current expectations that involve risks and uncertainties. Actual results may differ materially from those anticipated in these
forward-looking statements resulting from various factors. Please see &#8220;Cautionary Note Regarding Forward Looking Statements&#8221;
and &#8220;Risk Factors&#8221; in the Company&#8217;s Annual Report on Form 10-K for the year ended December 31, 2023), filed with the
Securities and Exchange Commission (the &#8220;SEC&#8221;). Unless the context otherwise requires, references in this section to &#8220;Predecessor&#8221;
is intended to mean the business and operations of CERo Therapeutics, Inc. prior to the Merger.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Overview</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">CERo Therapeutics, Inc. (Predecessor)
was incorporated in Delaware on September 23, 2016, and is based in South San Francisco, California. Predecessor was focused on developing
its therapeutic platform to genetically engineer human immune cells to fight cancer and did not begin clinical development or product
commercialization. The Company&#8217;s efforts will focus on continued product development, including clinical development, to support
regulatory approval to commercialize and subsequent product commercialization.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On June 4, 2023, Predecessor
entered into a Business Combination Agreement (as amended by that certain Amendment No. 1 to the Business Combination Agreement, dated
as of February 5, 2024 and Amendment No. 2 to the Business Combination Agreement, dated as of February 13, 2024, the &#8220;Business Combination
Agreement&#8221;) by and among PBAX and PBCE Merger Sub, Inc. (&#8220;Merger Sub&#8221;), pursuant to which Merger Sub merged with and
into Predecessor, with Predecessor surviving as a wholly-owned subsidiary of PBAX (the &#8220;Merger&#8221;). In connection with the consummation
of the Business Combination on February 14, 2024, PBAX changed its corporate name to &#8220;CERo Therapeutics Holdings, Inc.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">At the effective time of
the Merger, (i) each outstanding share of Predecessor common stock, was cancelled and converted into the right to receive shares of Common
Stock; (ii) each outstanding option to purchase Predecessor common stock was converted into an option to purchase shares of Common Stock,
par value $0.0001 per share; (iii) each outstanding share of Predecessor preferred stock, was converted into the right to receive shares
of Common Stock, and (iv) each outstanding warrant to purchase Predecessor preferred stock was converted into a warrant to acquire shares
of Common Stock. In addition, each outstanding Predecessor convertible bridge note was exchanged for shares of Series A Preferred Stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, the holders
of Predecessor common stock and Predecessor preferred stock have the contingent right to receive the Earnout Shares. At the Closing, the
Company issued three pools of shares of Common Stock subject to forfeiture if the applicable conditions to transferability thereof are
not satisfied: (i) 1,200,000 shares of Common Stock, which will be fully vested upon the achievement of certain adjusted stock price-based
earnout targets or upon a qualifying transaction (ii) 875,000 shares of Common Stock, pursuant to a Letter Agreement, dated as of February
14, 2024 which were fully vested at Closing of the Merger and which were issued as an offset to the Sponsor Share Forfeiture Agreement,
and (iii) 1,000,000 shares of Common Stock, which were fully vested upon the June 28, 2024 achievement of certain regulatory milestone-based
earnout targets.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">As consideration for the
Merger, the Company issued to Predecessor stockholders an aggregate of 7,597,638 shares of Common Stock, including 2,200,000 Earnout Shares
and 382,651 shares issuable upon exercise of rollover options or warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>February 2024 PIPE Financing</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In February 2024, the Company
consummated the first tranche of a private placement of 10,039 shares of the Series A Preferred Stock, issuance of common warrants to
purchase 612,746 shares of Common Stock and warrants to purchase 2,500 shares of Series A Preferred Stock, pursuant to the Amended and
Restated Securities Purchase Agreement, dated February 14, 2024, by and among Predecessor, PBAX and certain accredited investors for aggregate
cash proceeds to the Company of approximately $10.0 million, including cash previously received for bridge loan proceeds. A portion of
the Series A Preferred Stock was issued as consideration for the cancellation of outstanding indebtedness or securities of Predecessor
or PBAX, including a promissory note of PBAX and certain convertible bridge notes of Predecessor. Such transactions collectively are referred
to as the &#8220;February 2024 PIPE Financing.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>April 2024 PIPE Financing</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On April 1, 2024, the Company
consummated a private placement of 626 shares of the Series B Preferred Stock, pursuant to the Securities Purchase Agreement, dated March
28, 2024, by and among the Company and certain accredited investors, for aggregate cash proceeds to the Company of approximately $0.5
million (the &#8220;April 2024 PIPE Financing&#8221;).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>September 2024 PIPE Financing</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In September 2024, the Company
consummated a private placement of 2,853 shares of the Series C Preferred Stock with common warrants to purchase 8,175,166 shares of Common
Stock pursuant to the Securities Purchase Agreement, dated September 25, 2024, by and among certain accredited investors for aggregate
cash proceeds to the Company of approximately $1.25 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Investigational New Drug Application Submission</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On June 28, 2024, the Company
submitted an Investigational New Drug Application (&#8220;IND&#8221;) for its product candidate, CER-1236, to FDA. On July 26, 2024, the
Company was informed by the FDA that it has placed a clinical hold on the IND. The FDA indicated that the clinical hold has been placed
as a result of insufficient data provided with regard to two issues within pharmacology and toxicology of CER-1236. The FDA indicated
that, within 30 calendar days, it would provide a detailed official hold letter and requested that the Company hold its response until
after receipt of such letter (the &#8220;Hold Letter&#8221;).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Company received the
Hold Letter on July 26, 2024 and submitted a complete response letter to the FDA on October 21, 2024 in which the Company requested a
meeting to address the FDA&#8217;s questions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On November 15, 2024, the
Company received notice from the FDA that the IND for CER-1236 was cleared. The Company continues to believe that it will be able to initiate
the planned clinical trial by early 2025.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Nasdaq Notices of Non-compliance</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On July 19, 2024, the Company
received a letter (the &#8220;Bid Price Requirement Letter&#8221;) from the staff at The Nasdaq Global Market (&#8220;Nasdaq&#8221;) notifying
the Company that, for the 30 consecutive trading days prior to the date of the Bid Price Requirement Letter, the closing bid price for
the Common Stock has been below the minimum $1.00 per share required for continued listing on Nasdaq set forth in Nasdaq Listing Rule
450(a)(1), which is required for continued listing of the Common Stock on Nasdaq (the &#8220;Bid Price Requirement&#8221;). On October
23, 2024, the trading price for CERo common stock closed under $0.10 and was the tenth consecutive trading day to do so. On October 24,
2024, the Company received a letter from the staff at Nasdaq notifying the Company that, because its Common Stock had a closing bid price
of $0.10 or less for ten consecutive trading days, it was no longer eligible to rely upon the 180-day cure period set forth in the Bid
Price Requirement Letter.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On July 19, 2024, the Company
also received a letter (the &#8220;MVPHS Letter&#8221;) from Nasdaq notifying the Company that the &#8220;Market Value of Publicly Held
Shares&#8221; (the &#8220;MVPHS&#8221;) of the Common Stock had been below the minimum of $15,000,000 for the last 30 consecutive business
days prior to the date of the MVPHS Letter, which is required for continued listing of the Common Stock on Nasdaq (the &#8220;MVPHS Requirement&#8221;).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Such letters are in addition
to the letter from Nasdaq received by the Company on May 2, 2024 (the &#8220;MVLS Letter&#8221; and, together with the Bid Price Letter
and the MVPHS Letter, the &#8220;Letters&#8221;) notifying the Company that, for the 30 consecutive trading days prior to the date of
such MVLS Letter, the Common Stock had traded at a value below the minimum $50,000,000 &#8220;Market Value of Listed Securities&#8221;
(&#8220;MVLS&#8221;) requirement set forth in Nasdaq Listing Rule 5450(b)(2)(A), which is required for continued listing of the Common
Stock on Nasdaq (the &#8220;MVLS Requirement&#8221; and, together with the Bid Price Requirement and the MVPHS Requirement, the &#8220;Requirements&#8221;).
On October 30, 2024, the Company received a letter from the staff at Nasdaq notifying the Company that it had not regained compliance
with the MVLS Requirement within the 180-day compliance period set forth in the MVLS Letter.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Each of the Bid Price Requirement
and MVLS Requirement deficiencies results in the commencement of delisting proceedings. However, the Company has requested a hearing from
Nasdaq and plans to submit a plan to regain compliance with the listing requirements at such hearing. Notwithstanding that applicable
Nasdaq rules provide a 180-day compliance period to regain compliance with the MVPHS Requirement, the plan submitted by the Company in
connection with such hearing will be required to demonstrate a pathway to compliance with all applicable deficiencies.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Company intends to evaluate
available options to resolve these deficiencies and regain compliance with the Requirements. Such options may include seeking to qualify
for continued listing under a different continued listing standard of the Nasdaq Global Market or Nasdaq Capital Market, in lieu of the
MVPHS and MVLS requirements, including the Equity Standard, if the Company has sufficient stockholders&#8217; equity at such time. While
the Company is exercising diligent efforts to maintain the listing of its securities on Nasdaq, there can be no assurance that the Company
will be able to regain or maintain compliance with Nasdaq listing standards.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On November 11, 2024, the
Company&#8217;s stockholders approved a reverse stock split ranging from 1:25 to 1:150. The stockholder approval of the reverse stock
split provides the Board of Directors with the authority to determine the exact ratio of the reverse stock split and implement such reverse
stock split within a year after the date of such approval. The Board of Directors expects to determine the ratio and implement the reverse
stock split prior to the Nasdaq hearing. Although such reverse stock split is expected to enable regaining compliance with the Bid Price
Requirement, it is not intended to contribute to regaining compliance with the other Requirements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160; &#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Factors Affecting Our Performance</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Company believes that
its performance and future success depend on several factors that present significant opportunities for the Company but also pose risks
and challenges. These include, among others:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="width: 0.25in">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>




</div><!-- Field: Split-Segment; Name: 2 --><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><!-- Field: Page; Sequence: 145; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Components of Results of Operations</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Revenue</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Predecessor and the Company
have not recognized any revenue from any sources, including from product sales, and the Company does not expect to generate any revenue
from the sale of products in the foreseeable future. If the development efforts for the Company&#8217;s product candidates, each of which
is a specific product and indication combination, are successful and result in regulatory approval, or if the Company executes license
agreements with third parties, the Company may generate revenue from R&amp;D services, from the achievement of development milestones
or from milestones and royalties related to product sales. However, there can be no assurance as to when any revenues will be generated,
if at all.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Operating Expenses</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Research and Development Expenses</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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candidates. R&amp;D expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in R&amp;D
are capitalized until the goods or services are received. Costs incurred in obtaining technology licenses through asset acquisitions,
if incurred, will be charged to R&amp;D expense if the licensed technology has not reached technological feasibility and has no alternative
future use. R&amp;D expenses include or could include:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 146; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Product candidates in later
stages of development generally have higher development costs than those in earlier stages of clinical development, primarily due to
the increased size and duration of later-stage clinical trials. The Company plans to substantially increase its R&amp;D expenses for
the foreseeable future as it continues the development of its product candidates through clinical development. The Company cannot determine
with certainty the timing of initiation, the duration or the costs of current or future preclinical studies and clinical trials required
for regulatory approval due to the inherently unpredictable nature of preclinical and clinical development. Clinical and preclinical
development timelines, the probability of success and development costs can differ materially from expectations. The Company anticipates
that it will make determinations as to which product candidates to pursue and how much funding to direct to each product candidate on
an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and
ongoing assessments as to each product candidate&#8217;s commercial potential. The Company will need to, and plans to, raise substantial
additional capital in the future. Future R&amp;D expenses may vary significantly between periods and from current expectations based
on factors such as:</p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>General and Administrative Expenses</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">General and administrative
expenses consist principally of salaries and related costs for personnel in executive and administrative functions, including stock-based
compensation, travel expenses and recruiting expenses. Other general and administrative expenses include professional fees for legal,
accounting and tax-related services and insurance costs.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Company anticipates that
its general and administrative expenses will increase in the future as the Company increases headcount and contracted services for operational
support for expanded operations and infrastructure. The Company also anticipates that general and administrative expenses will increase
as a result of expenses for accounting, audit, legal and consulting services, as well as costs associated with maintaining compliance
with Nasdaq listing rules and SEC requirements, director and officer liability insurance, investor and public relations activities and
other expenses associated with operating as a public company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Interest and Other Income, Net</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Interest and other income,
net consists predominantly of interest income from interest bearing bank accounts, interest expense on payables, and the gain or loss
on the revaluation of derivative liabilities, which represents the change in fair value of earnout liabilities or outstanding warrants
between periods.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 147; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->133<!-- Field: /Sequence --></span></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Results of Operations for the three-months
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CERO THERAPEUTICS HOLDINGS, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="text-transform: uppercase"><b>Condensed
Consolidated </b></span><b>STATEMENTS OF OPERATIONS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Unaudited)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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    <td style="text-align: center"><b>&#160;</b></td><td><b>&#160;</b></td>
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    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>General and Administrative Expenses </i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">General and administrative
expenses were $2.6 million for the three-month period ended September 30, 2024 compared to $0.3 million for the three-month period ended
September 30, 2023, reflecting an increase of $2.4 million. The increase in the three-month period ended September 30, 2024, over the
three-month period ended September 30, 2023, was predominantly due to the expenses associated with operating as a publicly traded company.
The hiring of senior management in G&amp;A resulted in an increase of $0.4 million in the three-month period ended September 30, 2024,
versus the three-month period ended September 30, 2023, and expenses associated with public company filings and financings increased legal
expenses $1.0 million, and accounting and filing-associated expenses $0.2 million in the three-month period ended September 30, 2024,
versus the three-month period ended September 30, 2023. Business consulting services and directors&#8217; fees increased $0.5 million
in the three-month period ended September 30, 2024, versus the three-month period ended September 30, 2023. Public company insurance coverage
increased insurance expenses $0.1 million in the three-month period ended September 30, 2024, versus the three-month period ended September
30, 2023. Other expenses, including corporate communication expenses, recruiting expenses, IT expenses, and travel costs increased $0.2
million in the three-month period ended September 30, 2024, versus the three-month period ended September 30, 2023.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Research and Development Expenses </i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Research and development
expenses were $1.8 million for the three-month period ended September 30, 2024 compared to $1.3 million for the three-month period ended
September 30, 2023, reflecting an increase of $0.5 million. The increase was related to increased research and development activity as
the Company addressed regulatory questions related to the IND for CER-1236 and prepared for the clinical trial, anticipated to start after
the clinical hold for CER-1236 is lifted. Clinical expenses increased $0.2 million, manufacturing increased by $0.1 million and research
and development consulting increased by $0.3 million, offset by a reduction of $0.2 million in compensation expenses and the scientific
operations were conducted with more consulting and fewer employees in the three-month period ended September 30, 2024, versus the three-month
period ended September 30, 2023. The remaining $0.1 million increase in the three-month period ended September 30, 2024, over the three-month
period ended September 30, 2023, was related to lab supplies and expenses, additional pre-clinical work and facilities rent escalation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Company anticipates that
its R&amp;D expenses will significantly increase in the future as the Company increases headcount, compensation expense, and contracted
services for preclinical and clinical development of its product candidates, as well as for manufacturing of product to be used in clinical
development. &#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Other Income</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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for the three-month period ended September 30, 2024 and 2023. The immaterial change was related to higher interest income and slightly
lower gain from revaluation of liabilities in the three-month period ended September 30, 2024, versus the three-month period ended September
30, 2023.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 148; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Results of Operations for the nine-months ended
September 30, 2024 and 2023</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Results of Operations
for the nine-month period ended September 30, 2024 are <i>pro forma</i> as the period presented in the following table and discussion
includes the Predecessor for the period from January 1, 2024 through February 13, 2024 and the Company for the period from February 14,
2024 through September 30, 2024. This pro forma period from January 1, 2024 to September 30, 2024 does not include the Merger transactions
that occurred on-the-line.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CERO THERAPEUTICS HOLDINGS, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="text-transform: uppercase"><b>Condensed
Consolidated </b></span><b>STATEMENTS OF OPERATIONS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>(Unaudited)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(8,976,315</td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 4pt">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>General and Administrative Expenses </i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">General and administrative
expenses were $7.9 million for the nine-month period ended September 30, 2024, compared to $2.3 million for the nine-month period ended
September 30, 2023, reflecting an increase of $5.7 million. The increase in the nine-month period ended September 30, 2024, over the nine-month
period ended September 30, 2023, was predominantly due to a $1.8 million expense consisting of the remaining underwriting fees from the
PBAX initial public offering, which were earned on the consummation of the business combination. Additionally, the hiring of senior management
in G&amp;A resulted in an increase of $1.6 million, including recruiting fees. Legal fees increased $0.8 million and business consulting
increased $0.3 million in the nine-month period ended September 30, 2024, versus the nine-month period ended September 30, 2023. Expenses
related to services required for SEC compliance, such as printing and transfer agency fees, increased $0.4 million and public company
insurance coverage increased insurance expenses $0.4 million in the nine-month period ended September 30, 2024, compared to the nine-month
period ended September 30, 2023. Corporate communications and director fees each increased $0.2 million in the nine-month period ended
September 30, 2024 compared to the nine-month period ended September 30, 2023. The additional expenses are all driven by the increased
expenses of operational compliance as a public company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Research and Development Expenses </i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Research and development
expenses were $6.2 million for the nine-month period ended September 30, 2024, compared to $4.3 million for the nine-month period ended
September 30, 2023, reflecting an increase of $1.9 million. The increase was related to increased R&amp;D activity as the Company prepared
and filed the IND for CER-1236, prepared for the clinical trial initiation, and conducted additional experiments in response to the FDA
questions related to the IND. Compensation increased $0.1 million, clinical expenses increased $0.2 million, and consulting expenses increased
$0.9 million in the nine-month period ended September 30, 2024, due to activities related to the preparation of the IND and responses
to questions from FDA, and preparation for the anticipated clinical trial for CER-1236. To complete the IND application, multiple manufacturing
runs were necessary, increasing manufacturing costs by $0.2 million in the nine-month period ended September 30, 2024, versus the nine-month
period ended September 30, 2023. Additional studies required to address FDA questions increased pre-clinical study costs by $0.3 million.
The remaining $0.2 million increase in the nine-month period ended September 30, 2024, versus the nine-month period ended September 30,
2023, was predominantly related to lab supplies and expenses and facilities rent escalation.</p><div>

</div><p style="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"></p><div>

</div><!-- Field: Page; Sequence: 149; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->135<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Company anticipates that
its R&amp;D expenses will significantly increase in the future as the Company increases headcount, compensation expense, and contracted
services for preclinical and clinical development of its product candidates, as well as for manufacturing of clinical product to be used
in clinical development.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i>&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Other Income</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Other income was $5.1 million
for the nine-month period ended September 30, 2024, compared to $0.5 million for the nine-month period ended September 30, 2023, reflecting
an increase of $4.6 million. The increase in 2024 relative to 2023 was predominantly due to the $4.7 million change in value of the Company&#8217;s
Earnout Liability in the nine-month period ended September 30, 2024. Settlement of vendor liabilities in 2024 resulted in a $0.6 million
increase in income in 2024, offset by an additional $0.1 million less interest income and $0.6 million other expense for the delayed S-1
penalty.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Results of Operations for the Year Ended
December 31, 2023 (Predecessor) as Compared to Year Ended December 31, 2022 (Predecessor)</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">2,386,469</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Loss from operations</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(7,675,049</td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(11,971,231</td><td style="text-align: left">)</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 4pt">Net loss</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(7,289,577</td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(11,829,116</td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 4pt">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>General and Administrative Expenses </i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">General and administrative
expenses were $2.39 million for the year ended December 31, 2023 compared to $2.13 million for the year ended December 31, 2022, reflecting
a decrease of $0.26 million. Compensation related expenses decreased $0.87 million in 2023 as compared to 2022, due primarily to reduced
headcount and recruiting expenses and reduction in software and other employee support expenses contributed $0.15 million to the 2023
decrease from 2022. Intellectual property expenses declined $0.66 million and public communication services expenses declined $0.42 million
in 2023 relative to 2022. These decreases in expenses were offset by a $1.41 million increase in legal, accounting, and business consulting
fees related to outsourced finance functions and activity related to preparation for the Business Combination.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Research and Development Expenses </i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">R&amp;D expenses were $5.29
million for the year ended December 31, 2023, compared to $9.85 million for the year ended December 31, 2022 reflecting a decrease of
$4.6 million. Compensation related expenses decreased $2.1 million in 2023 as compared to 2022, due primarily to reduced headcount and
recruiting expenses and reduction in software and other employee support expenses contributed $0.14 million to the 2023 decrease from
2022. Research activity slowed, resulting in a decrease of $1.84 million in supplies and external research service expenses in 2023 relative
to 2022. Manufacturing slowed in 2023 relative to 2022, causing contract manufacturing expense to decline $0.70 million in 2023 versus
2022. Partially offsetting these declines, we received $0.18 million less in expense reimbursements from a collaboration partner in 2023
compared to 2022.</p><div>

</div><p style="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"></p><div>

</div><!-- Field: Page; Sequence: 150; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->136<!-- Field: /Sequence --></span></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We anticipate that its R&amp;D
expenses will significantly increase in the future as we increase headcount and contracted services for preclinical and clinical development
of its product candidates, as well as for manufacturing of clinical product to be used in clinical development.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Interest and Other Income, Net</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Interest and other income,
net increased $0.24 million, from $0.14 million in the year ended December 31, 2022 to $0.39 million in the year ended December 31, 2023.
The change was primarily due to a $0.25 million increase in the gain on the revaluation of the warrant liability from $0.04 million to
$0.29 million as of December 31, 2022, and 2023, respectively. This decrease was offset by a $0.01 million decrease in net interest income
from $0.10 to $0.09 million in the years ended December 31, 2022, and 2023, respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Liquidity and Capital Resources</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Capital Requirements </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Predecessor and the Company
have not generated any revenue from any source and the Company does not expect to generate revenue for at least the next few years.&#160;If
the Company fails to complete the timely development of, or fails to obtain regulatory approval for, its product candidates, the ability
of the Company to generate future revenue will be adversely affected. The Company does not know when, or if, it will generate any revenue
from its product candidates, and does not expect to generate revenue unless and until the Company obtains regulatory approval and commercialization
of its product candidates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Company expects its expenses
to increase significantly in connection with its ongoing activities, particularly as it continues and expands research, preclinical development,
and clinical development to support marketing approval for its product candidates. In addition, if the Company obtains approval for any
of its product candidates, the Company expects to incur significant commercialization expenses related to sales, marketing, manufacturing
and distribution. Furthermore, the Company expects to incur additional costs associated with operating as a public company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Company, therefore, anticipates
that substantial additional funding will be needed in connection with its continuing operations. At September 30, 2024, the Company had
$3.4&#160;million in cash, restricted cash and cash equivalents. The Company intends to devote most of the available cash to the preclinical
and clinical development of its product candidates and public company compliance costs. Based on current business plans, the Company believes
that the cash available at September 30, 2024 will not fund its operations and capital requirements for 12 months after the filing of
the unaudited financial statements for the nine-month period ended September 30, 2024. The Company has arranged two equity lines of credit,
one providing for the sale of up to 25,000,000 newly issued shares of Common Stock and the other providing for the purchase of up to $25
million of Common Stock on the satisfaction of certain conditions. At September 30, 2024, the Company had 2.8 million shares remaining
in the first ELOC, which was fully depleted on October 3, 2024, and $25 million remaining in the second ELOC, which was replaced with
a second ELOC arranged with the investor in the first ELOC (see Note 12 &#8211; Subsequent Events). The Company has no guarantee that
the conditions will be satisfied to require the purchase of all, or any additional amount, of the Equity Line of Credit (&#8220;ELOC&#8221;)
funds. Any estimate as to how long the Company expects the net proceeds from the ELOC funding may fund the Company&#8217;s operations
is based on assumptions that may prove to be wrong, and the Company could use its available capital resources sooner than its current
expectations. Changing circumstances, some of which may be beyond the Company&#8217;s control, could result in less cash and cash equivalents
available to fund operations or cause the Company to consume capital significantly faster than currently anticipated, and the Company
may need to seek additional funds from additional sources sooner than planned.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Because of the numerous risks
and uncertainties associated with research, development and commercialization of pharmaceutical drug products, the Company is unable to
estimate the exact amount of its operating capital requirements. The Company&#8217;s future funding requirements will depend on many factors,
including, but not limited to those listed under &#8220;Factors Affecting Our Performance&#8221; above.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 151; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->137<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

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candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes many
years to complete, and the Company may never generate the necessary data or results required to obtain marketing approval and achieve
product sales. In addition, the Company&#8217;s product candidates, if approved, may not achieve commercial success. Commercial revenues,
if any, will be derived from sales of product candidates that the Company does not expect to be commercially available in the near term,
if at all. Accordingly, the Company will need to continue to rely on additional financing to achieve its business objectives. Adequate
additional financing may not be available to the Company on acceptable terms, or at all. To the extent that the Company raises additional
capital through the sale of equity or convertible debt securities, the terms of these equity securities or this debt may restrict the
Company&#8217;s ability to operate. Any future debt financing and equity financing, if available, may involve covenants limiting and restricting
the ability to take specific actions, such as incurring additional debt, making capital expenditures, entering into profit-sharing or
other arrangements or declaring dividends. If the Company raises additional funds through collaborations, strategic alliances or marketing,
distribution or licensing arrangements with third parties, it may be required to relinquish valuable rights to its technologies, future
revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to the Company. If the
Company is unable to raise capital when needed or on acceptable terms, the Company could be forced to delay, reduce or eliminate its R&amp;D
programs or future commercialization efforts.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Cash Flows</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Nine Months Ended September 30, 2024 and
2023</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td><b>&#160;</b></td>
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    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td><b>&#160;</b></td><td style="padding-bottom: 1.5pt"><b>&#160;</b></td>
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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">(11,375,873</td><td style="width: 1%; text-align: left">)</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">(4,829,217</td><td style="width: 1%; text-align: left">)</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">(6,546,656</td><td style="width: 1%; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">12,240,682</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">571,679</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">11,669,003</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Net cash used in operating activities </i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Net cash used in operating
activities increased $6.6 million from $4.8 million to $11.4 million in the nine-month period ended September 30, 2023 and 2024 respectively.
The increase in cash used was largely related to having a $4.8 million increase in the adjustment to net loss related to the gain on the
revaluation of derivative liabilities. The difference in net loss reflected $3.0 million more cash being used, offset by a larger non-cash
adjustment for stock-based compensation of $1.9 million in the nine-month period ended September 30, 2024 versus 2023. The difference
of $0.1 million of cash resulting from increasing accounts payable and accruals was offset by $0.1 million increase in prepaid expenses
and $0.6 million in vendor settlements in the nine-month period ended September 30, 2024 versus 2023. The remaining difference was an
additional $0.1 million in adjustment to lease liability due to rent escalation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Net cash provided by financing activities</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Net cash provided by financing
activities increased $11.7 million from $0.6 million in the nine-month period ended September 30, 2023 to $12.2 million in the nine-month
period ended September 30, 2024. The increase was related to the net proceeds of $7.3 million from the issuance of Series A and B Preferred
Stock, the net proceeds of $0.7 million from the issuance of Series C Preferred Stock and associated warrants, the gross proceeds of $4.3
million for the sale of common stock under the ELOC, and $0.1 million related to net insurance financing. These increases in cash were
partially offset by the $0.6 million borrowing under the bridge loan in 2023, for which there was no equivalent in the nine-month period
ended September 30, 2024.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 152; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->138<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Years Ended December 31, 2023 and 2022 </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Net cash used in operating activities </i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Net cash used in operating
activities decreased $5.9 million from $11.7 million to $5.8 million in the years ended December 31, 2022, and 2023, respectively. Our
operating activities significantly slowed and headcount was reduced, resulting in a $4.5 million reduction in net loss in 2023 relative
to 2022, and an increase in accrued expenses and accounts payable of $2.1 million in 2023 relative to 2022 resulted in $6.6 million less
cash being expended in 2023 compared to 2022. The gain on the revaluation of the warrant liability resulted in a $0.25 million offset
and other non-cash components resulted in a $0.20 million offset to the decrease in the net loss in 2023 versus 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Net cash used in investing activities</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In the year ended December
31, 2022, we purchased $0.69 million of property and equipment, while no purchases were made in 2023. The majority of the purchases were
laboratory equipment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Net cash provided by financing activities</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Net cash provided in financing
activities increased $0.57 million from an immaterial amount to $0.57 million in the years ended December 31, 2022, and 2023, respectively.
The change was a result of the issuance of a bridge loan to investors that provided $0.57 million of net proceeds in 2023.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Contractual Obligations and Other Commitments
</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">None.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Critical Accounting Policies and Significant
Judgments and Estimates </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The preparation of financial
statements in conformity with accounting principles generally accepted in the United States of America (&#8220;U.S.&#8221;) requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at
the date of the financial statements, and the reported amounts of expenses incurred during the reporting period. Significant items subject
to such estimates and assumptions include the estimates of the fair values of convertible preferred stock, earnout-related Common Stock,
and preferred stock warrant liability, stock-based compensation expense, the fair value of right-to-use assets and lease liabilities,
and the valuation allowance associated with deferred tax assets. Actual results could differ from those estimates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Predecessor and the Company
define its critical accounting policies as those accounting principles that require it to make subjective estimates and judgments about
matters that are uncertain and are likely to have a material impact on its financial condition and results of operations, as well as the
specific manner in which it applies those principles. While significant accounting policies are more fully described in Note 2 to the
Company&#8217;s unaudited financial statements appearing elsewhere in this prospectus, the Company believes the following are the critical
accounting policies used in the preparation of its financial statements that require significant estimates and judgments.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><b>Fair value measurements</b>
- Fair value is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants on the measurement date. In determining fair value, the assumptions that market participants would use in pricing an asset
or liability (the inputs) are based on a tiered fair value hierarchy consisting of three levels, as follows:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.5in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Level 1</b></span></td>
    <td style="width: 0.25in; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">- </span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.5in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Level 2</b></span></td>
    <td style="width: 0.25in; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">- </span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Inputs (other than quoted prices included in Level 1) that are either directly or indirectly observable for the asset or liability. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.5in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Level 3</b></span></td>
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Unobservable inputs for which there is little or no market data and which require the Company to develop its own assumptions about how market participants would price the asset or liability. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 153; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->139<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The categorization of a financial
instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The carrying amounts of cash,
restricted cash, and cash equivalents, prepaid expenses and other current assets, accounts payable, and accrued liabilities approximate
fair value due to their relatively short-term maturities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Research and development </i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">R&amp;D costs consist primarily
of salaries and benefits, including stock-based compensation, occupancy, materials and supplies, contracted research, consulting arrangements,
and other expenses incurred in the pursuit of R&amp;D programs. R&amp;D costs are expensed as incurred.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><b><i>Stock-based compensation</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Company periodically
issues Common Stock and stock options to officers, directors, and consultants for services rendered. The Company accounts for stock-based
compensation as measured at grant date, based on the fair value of the award. The Company uses a Black-Scholes option pricing model (&#8220;Black-Scholes&#8221;)
to estimate option award fair value, which requires the input of subjective assumptions, including the expected volatility of Common Stock,
expected risk-free interest rate, and the option&#8217;s expected life. The Company also evaluates the impact of modifications made to
the original terms of equity awards when they occur. The fair value of restricted stock awards is based upon the share price of the Common
Stock on the date of grant.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The fair value of equity
awards that are expected to vest is amortized on a straight-line basis over the requisite service period. Stock-based compensation expense
is recognized net of actual forfeitures when they occur, as an increase to additional paid-in capital in the condensed consolidated balance
sheets and in research and development or, general and administrative expenses in the condensed consolidated statements of operations
and comprehensive loss. All stock-based compensation costs are recorded in the condensed consolidated statements of operations based upon
the underlying employee&#8217;s role within the Company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Income taxes</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Company accounts for
income taxes under the liability method. Under this method, deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences
are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts
expected to be realized.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Company follows tax accounting
requirements for the recognition, measurement, presentation, and disclosure in the financial statements of any uncertain tax positions
that have been taken or expected to be taken on a tax return. No liability related to uncertain tax positions is recorded in the financial
statements. It is the Company&#8217;s policy to include penalties and interest expense related to income taxes as a component of income
tax expense, as necessary. The Company has not recorded any interest or penalties associated with income tax since inception. Tax years
subsequent to 2020 are subject to examination by federal and state authorities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Recent Accounting Pronouncements </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Company has concluded
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Qualitative and Quantitative Disclosures About Market Risk </b></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Company&#8217;s primary
exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly
because of the Company&#8217;s investments, including cash equivalents, which may be in the form of a money market fund.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In the future, the Company
may contract with vendors invoicing in a foreign denominated currency. As a result, the Company may be subject to fluctuations in foreign
currency rates in connection with certain of these agreements. Transactions denominated in currencies other than the United States dollar
will be recorded based on exchange rates at the time such transactions arise. As of September 30, 2024, all transactions have been denominated
in U.S. dollars.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Inflation will generally
affect the Company by increasing the cost of labor and costs associated with preclinical and clinical trials and future manufacturing
and commercialization activities as well as general corporate costs. The Company does not believe that inflation had a material effect
on the Company&#8217;s business, financial condition or results of operations for the period ended September 30, 2024, but increased inflation
may materially impact the Company in later periods of 2024 and beyond.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Emerging Growth Company and Smaller Reporting Company Status </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In April 2012, the Jumpstart
Our Business Startups Act&#160;of&#160;2012 (the &#8220;JOBS Act&#8221;) was enacted. Section&#160;107 of the JOBS Act provides that an
&#8220;emerging growth company&#8221; can take advantage of the extended transition period provided in Section&#160;7(a)(2)(B) of the
Securities Act of 1933, as amended, for complying with new or revised accounting standards. Thus, an emerging growth company can delay
the adoption of certain accounting standards until those standards would otherwise apply to private companies. PBAX previously elected
the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards
until they would be applicable to private companies. The Company expects to continue to take advantage of the benefits of the extended
transition period.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, as an emerging
growth company, the Company may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally
to public companies. These provisions include:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Company will cease to
qualify as an emerging growth company on the date that is the earliest of: (i)&#160;the last day of the fiscal year following the fifth
anniversary of the date of the first sale of shares of PBAX Class A Common Stock in its initial public offering, (ii)&#160;the last day
of the fiscal year in which the Company has more than $1.07&#160;billion in total annual gross revenues, (iii)&#160;the date on which
the Company is deemed to be a &#8220;large accelerated filer&#8221; under the rules of the SEC, which means the market value of the Common
Stock that is held by non-affiliates exceeds $700.0&#160;million as of the prior June 30th, or (iv)&#160;the date on which the Company
has issued more than $1.0&#160;billion of non-convertible debt over the prior three-year period. The Company may choose to take advantage
of some but not all of these reduced reporting burdens. Accordingly, the information contained herein may be different than you might obtain from other public companies.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_017"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>MANAGEMENT OF CERO</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Executive Officers and Directors</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">As of December 2, 2024, our directors and executive
officers were as follows:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

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    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: center">44</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: center">54</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Michael Byrnes</td><td>&#160;</td>
    <td style="text-align: center">48</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Kathleen LaPorte</td><td>&#160;</td>
    <td style="text-align: center">63</td><td>&#160;</td>
    <td>Director</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: center">56</td><td>&#160;</td>
    <td>Director</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Shami Patel</td><td>&#160;</td>
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    <td>Director</td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Executive Officers</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><b>Chris Ehrlich</b>&#160;has
served as our Chairman and Chief Executive Officer since December 2024. From October 2024 to November 2024, he served as the interim Chairman
and Chief Executive Officer. Prior to this, he served as the Vice Chairman of our board of directors from February 2024 to October 2024.
He previously served as the Chief Executive Officer of PBAX from October 2021 until the Closing of the Business Combination in February
2024. From January 2021 to August 2021, he served as the Chief Executive Officer of Locust Walk Acquisition Corp (Nasdaq: LWAC) until
it merged with eFFECTOR Therapeutics, Inc. He is also the Principal of Ehrlich Bioventures, LLC, a consultancy working with emerging biopharma
companies. He previously served as Senior Managing Director and the Global Head of Strategic Transactions at Locust Walk Partners from
2013 to 2021. He brings significant biotechnology industry, business development, venture capital experience, investment banking and SPAC
experience. While at Locust Walk Partners, Mr.&#160;Ehrlich was involved with sourcing and leading multiple transactions for emerging
biopharmaceutical companies, including the sale of Xyphos Biosciences, Inc. to Astellas in 2019 and the sale of Thar Pharmaceuticals to
Grunenthal in 2018.&#160;Prior to Locust Walk Partners, he was a Managing Director at InterWest Partners (&#8220;InterWest&#8221;), a
venture capital firm. At InterWest, he served on the boards of KAI Pharmaceuticals, a privately held pharmaceutical company (acquired
by Amgen in 2012), Biomimetic Therapeutics, Inc., a biotechnology company (acquired by Wright Medical Technologies in 2013), Invuity,
Inc., a medical technology company acquired by Stryker in 2018) and Xenon Pharmaceuticals, a biopharmaceutical company (Nasdaq: XENE).
Prior to joining InterWest, Mr.&#160;Ehrlich worked as the Director of Licensing and Business Development at Purdue Pharma, in business
development at Genentech, in venture capital at the U.S. Russia Investment Fund, and in biotechnology strategy development at L.E.K. Consulting.
Mr.&#160;Ehrlich also currently serves on the board of directors of Prostate Management Diagnostics, Inc., on the advisory board of the
Peter Michael Foundation, where he is a Senior Advisor, and on the healthcare at Kellogg advisory board at Northwestern University. Mr.&#160;Ehrlich
has a B.A. in Government from Dartmouth College and an M.B.A. from the Kellogg Graduate School of Management at Northwestern University,
where he is a frequent lecturer.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Mr. Ehrlich was selected
to serve on our board of directors based on his substantial investment and acquisition experience in the biotechnology and biopharmaceutical
industries and his experience serving as a director for various public and private companies.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><b>Andrew &#8220;Al&#8221;
Kucharchuk</b> has served as the Chief Financial Officer since October 2024, Chief Financial Officer of Nukkleus Inc. (NUKK) since June
2024 and as Chief Financial Officer of Chain Bridge I (NASDAQ: CBRGU) since April 2024. Previously, Mr. Kucharchuk was the Chief Financial
Officer of Theralink Technologies, Inc. (OTC: THER) from May 2023 to June 2024. Prior to his role at Theralink, Mr. Kucharchuk was the
Chief Financial Officer of Adhera Therapeutics, Inc (OTC: ATRX) from September 2022 to August 2023. Prior to that role, Mr. Kucharchuk
held various positions at OncBioMune Pharmaceuticals, Inc. including Chief Executive Officer, Chief Operating Officer and Chief Financial
Officer from November 2006 to July 2020 and has served as a member of the board of directors since June 2020. Mr. Kucharchuk holds a B.A.
in Business and an MBA in Finance from Tulane University.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><b>Kristen Pierce</b> has
served as the Chief Development Officer since October 2024. Dr. Pierce has over 20 years of oncology experience, leading nonclinical and
early clinical stage projects. Prior to joining CERo, Dr. Pierce was Vice President, Translational Medicine at Pionyr Immunotherapeutics
from September 2021 to June 2023. Prior to that, she served as Executive Director, Asset Team Leader at Pfizer Inc. (NYSE: PFE) where
she led the late nonclinical and early clinical development of several antibody and small molecules in oncology. Dr. Pierce received her
Ph.D. from the University of Arizona in Pharmacology and Toxicology and spent four years as a postdoc at Duke University in the laboratory
of the Nobel Prize winning scientist, Dr. Robert J. Lefkowitz. Dr. Pierce received her B.A. from Bates College.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Directors</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><b>Brian G. Atwood</b>&#160;previously
served as Chairman and Chief Executive Officer of CERo from February 2024 to September 2024, and previously served as Chairman of PBAX
from October 2021 the Closing of the Business Combination in February 2024.&#160;Mr.&#160;Atwood serves as a Managing Director for Versant
Ventures, a healthcare-focused venture capital firm that he co-founded in 1999.&#160;In 2015, Mr.&#160;Atwood co-founded Cell Design Labs,&#160;Inc.,
a biotechnology company focused on developing human cell engineering technology for the treatment of multiple diseases, including cancer,
where he served as President and Chief Executive Officer until 2017, when it was acquired by Gilead Sciences.&#160;Mr.&#160;Atwood serves
on the board of directors of Clovis Oncology,&#160;Inc. (Nasdaq: CLVS), and Atreca, Inc. (Nasdaq: BCEL), where he is Chairman. He also
served on the board of directors of Immune Design Corp. from May 2008 until June 2016 (acquired by Merck in 2019), Veracyte,&#160;Inc.,
from its founding in 2008 until December 2016, OpGen&#160;Inc., from July 2007 until December 2017, Five Prime Therapeutics, from 2002
until March 2016, Cadence Pharmaceuticals,&#160;Inc. from March 2006 until its acquisition in March 2014, Helicos Biosciences from 2003
until September 2011, Pharmion Corporation from 2000 until its acquisition in March 2008, Trius Therapeutics,&#160;Inc. from February
2007 until its acquisition in September 2013 and Locust Walk Acquisition Corp. (Nasdaq: LWAC) from January 2021 until the consummation
of its business combination in August 2021. Mr.&#160;Atwood holds a B.S. in Biological Sciences from the University of California, Irvine,
a M.S. in Ecology from the University of California, Davis, and a M.B.A. from Harvard Business School.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Mr. Atwood was selected to
serve on our board of directors because of his experience in the biotechnology industry, his years of business and leadership experience
and his financial sophistication and expertise.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><b>Michael Byrnes</b> has
served as a member of our board of directors since February 2024. Mr. Byrnes has served as the Chief Financial Officer of eFFECTOR Therapeutics
since December 2020. Previously, Mr. Byrnes was Senior Vice President of Finance at Principia Biopharma, Inc. from January 2020 until
its acquisition by Sanofi in September 2020. Prior to that, Mr. Byrnes served as the Chief Financial Officer of Alkahest, Inc. from May
2018 to January 2020 and Chief Financial Officer of Ocera Therapeutics, Inc., from December 2014 until its acquisition by Mallinckrodt
Pharmaceuticals in December 2017. Mr. Byrnes served as Corporate Controller of Maxygen, Inc. from March 2010 to December 2014 and prior
to that, held finance positions of increasing responsibility from 2000 to 2010 with NeurogesX, Inc., Lipid Sciences, Inc. and ADAC Laboratories,
Inc., a Philips Medical Systems company. Mr. Byrnes received his B.S.C. in Finance from Santa Clara University and an M.B.A. from California
State University, Hayward.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Mr. Byrnes was selected to
serve on our board of directors based on his substantial leadership and management experience in the biopharmaceutical industry.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><b>Kathleen LaPorte</b> has
served as a member of our board of directors since February 2024, and previously served a member of PBAX&#8217;s board of directors from
October 2021 until the Closing of the Business Combination in February 2024. Ms. LaPorte is an experienced executive, founder and board
member, focused on life sciences. She co-founded New Leaf Ventures, served as a General Partner of The Sprout Group, and was Chief Business
Officer and Chief Executive Officer of Nodality Inc. Ms. LaPorte has served on sixteen public company boards and fourteen public company
audit committees and numerous private company boards. Ms. Laporte currently serves as an independent director for Bolt Biotherapeutics
(Nasdaq: BOLT), Precipio Diagnostics (Nasdaq: PRPO), 89Bio (Nasdaq: ENTB), Elysium Therapeutics, and Q32 Bio Inc. (Nasdaq: QTTB). Ms.
LaPorte serves as the chair of the audit committees of Bolt Biotherapeutics, Precipio Diagnostics and Q32 Bio and as the chair of the
compensation committee of 89Bio. She previously served on the California Institute for Regenerative Medicine, a state agency board. Ms.
LaPorte has a B.S. degree in Biology from Yale University and a M.B.A. from the Stanford University Graduate School of Business.</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Ms. LaPorte was selected
to serve on our board of directors based on her extensive leadership and management experience in the life sciences industry.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><b>Lindsey Rolfe, M.D.</b>,
has served as a member of our board of directors since February 2024. Dr Rolfe has served as Chief Medical Officer at 3B Pharmaceuticals
GmbH since August 2023 and previously served as Chief Medical Officer at Clovis Oncology Inc. from August 2015 to June 2023, and served
as Senior Vice President of Clinical Development from 2010. At Clovis, Dr.&#160;Rolfe oversaw the development team that obtained approvals
for Rubraca as an ovarian cancer treatment in the United States and Europe, and was responsible for all pre- and post-marketing medical
activities. Dr.&#160;Rolfe has more than 20&#160;years of drug development experience and previously served in senior oncology development
roles at Celgene Corporation, Pharmion Corporation, Cambridge Antibody Technology, UCB Inc. and Celltech Group plc. In addition, Ms. Rolfe
has served as an independent director at Atreca Inc. (Nasdaq: BCEL) since August 2019. Dr.&#160;Rolfe holds a BSc Anatomy and Bachelor
of Medicine and Surgery from the University of Edinburgh, undertook post-graduate medical training in London, UK and obtained her post-graduate
internal medicine qualification as a Member of the Royal College of Physicians. She has specialist accreditation in Pharmaceutical Medicine
from the UK General Medical Council and is a Fellow of the Faculty of Pharmaceutical Medicine in the UK.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Dr.&#160;Rolfe was selected
to serve on our board of directors based on her experience in leading drug discovery and development of therapeutics.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><b>Shami Patel </b>has served
as a member of our board of directors since October 2024. Mr. Patel is a Managing Director at Launchpad Capital and has over 25 years
of global experience in financial services and capital markets as an executive, board member and investor. Mr. Patel is also an advisor
to Launch One Acquisition Corp. (Nasdaq: LPAA), a blank check company which raised $230.0 million in its initial public offering in July
2024 and is currently searching for a business combination target in the healthcare or healthcare related industries and, in particular,
life sciences. He was formerly a Managing Director at Cohen Circle from January 2015 to August 2024. His SPAC experience includes being
the Chief Operating Officer of FTAC Olympus Acquisition Corp. from July 2020 to August 2020, which merged with Payoneer Inc. (NASDAQ:
PAYO) in June 2021, as an advisor to Phoenix Biotech Acquisition Corp., which merged with CERo Therapeutics Holdings, Inc. (NASDAQ: CERO)
in February 2024, as an advisor to Newcourt Acquisition Corp. which merged with Psyence Biomedical Ltd. (NASDAQ: PBM) in January 2024,
and as an advisor to LWAC, which merged with eFFECTOR Therapeutics, Inc. (NASDAQ: EFTR) in August 2021. Mr. Patel was also active in origination,
due diligence and execution of SPACs as a member of the Board of FinTech Acquisition Corp. which merged with CardConnect LLC (NASDAQ:
CCN) in August 2016 and FinTech Acquisition Corp. II which merged with Intermex Holdings II, Inc. in July 2018, and the merged company
was renamed International Money Express, Inc. (NASDAQ: IMXI); Mr. Patel served as a board observer of IMXI following its business combination,
until March 2020. He also served as an advisor to FinTech Acquisition Corp. III which merged with Paya Holdings Inc. (NASDAQ: PAYA) in
October 2020 and FinTech Acquisition Corp. IV which merged with Perella Weinberg Partners (NASDAQ: PWP) in June 2021. Aside from his experience
with special purpose acquisition companies, from 2010 to 2015 Mr. Patel served as the Vice Chairman of the board of directors and Chair
of the compliance committee of Golden Pacific Bancorp, Inc., which was acquired by SoFi Technologies (NASDAQ: SOFI). From 2012 to 2014,
he served at Clean Pacific Ventures Management, LLC, a venture capital firm specializing in early stage investments, as a venture partner.
Mr. Patel was a partner at, and served on the executive committee of, Hexagon Securities, LLC, a credit focused investment bank and securities
firm from 2010 to 2012. From 2001 to August 2009, he served as Managing Director and Senior Partner at Cohen &amp; Company, where he helped
launch Alesco Financial, Inc. (NYSE: AFN), where he served as Chief Operating Officer and Chief Investment Officer from 2006 to 2009.
From 1999 to 2000, he served as Chief Financial Officer for TRM Corporation (NASDAQ: TRMM), a consumer and financial services company.
In 2000, Mr. Patel co-founded iATMglobal.net, a middleware software business where he served as Chief Executive Officer and which was
sold to NCR Corporation in 2001. He served as Vice President of the West Coast Region for Sirrom Capital Corporation, a mezzanine finance
fund, from 1998 to 1999. Prior to this he was in the business services group at Robertson Stephens, an investment banking firm, from 1997
to 1998 and served as a strategy consultant in the energy group at Andersen Consulting (now known as Accenture plc) from 1991 to 1993.
Mr. Patel served on the Board of Visitors of Duke University School of Law from 2011 to 2023 where he was a Senior Lecturing Fellow. Mr.
Patel received a Juris Doctor with honors and Master of Business Administration from Duke University and Bachelor of Arts in Philosophy
and Economics from Trinity University.</p><div>

</div><p style="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Mr. Patel was selected to
serve on our board of directors based on his extensive investment, leadership and operational experience.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Family Relationships</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">There are no family relationships
between our board of directors and any of our executive officers.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Board of Directors</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Director Independence</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Nasdaq listing rules require
that a majority of the board of directors of a company listed on Nasdaq be composed of &#8220;independent directors,&#8221; which is defined
generally as a person other than an officer or employee of a company or its subsidiaries or any other individual having a relationship,
which, in the opinion of such company&#8217;s board of directors, would interfere with the director&#8217;s exercise of independent judgment
in carrying out the responsibilities of a director. Based on business and personal information provided by each director concerning her
or his background, employment, and affiliations, including family relationships, our board of directors has determined that each of Mr.
Byrnes, Ms. LaPorte, Dr. Rolfe and Mr. Patel is an independent director under the Nasdaq listing rules and Rule 10A-3 of the Exchange
Act. In addition, we determined that each of Brian G. Atwood, Barbara A.&#160;Kosacz and Caroline M.&#160;Loewy, who served on the board
of directors during fiscal year 2023, and Ms. Rapaport, who served on the board of directors during fiscal year 2024 until September 2024,
was also an independent director under the Nasdaq listing rules and Rule 10A-3 of the Exchange Act. In connection with Mr. Atwood&#8217;s
appointment as our Chief Executive Officer in February 2024, Mr. Atwood ceased to be independent, and in connection with Mr. Ehrlich&#8217;s
appointment as our Interim Chairman and Chief Executive Officer on September 30, 2024, Mr. Ehrlich ceased to be independent. Mr. Erhlich
was determined by the board of directors to be independent from the closing of the Business Combination until his appointment as our Interim
Chairman and Chief Executive Officer.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, the rules of
Nasdaq require that, subject to specified exceptions, each member of a listed company&#8217;s audit, compensation and nominating and corporate
governance committees be independent. Under the rules of Nasdaq, a director will only qualify as an &#8220;independent director&#8221;
if, in the opinion of that company&#8217;s board of directors, that person does not have a relationship that would interfere with the
exercise of independent judgment in carrying out the responsibilities of a director.&#160;In making these determinations, our board of
directors considered the current and prior relationships that each non-employee director has with us and all other facts and circumstances
our board of directors deemed relevant in determining independence, including the beneficial ownership of our Common Stock by each non-employee
director and relationships with each of PBAX and Legacy CERo.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Classified Board of Directors</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In accordance with the terms
of our Charter, our board of directors is divided into three classes with staggered, three-year terms. At each annual meeting of stockholders,
the directors whose terms then expire will be eligible for reelection until the third annual meeting following reelection. Our directors
are divided among the three classes as follows:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the Class I directors are Mr. Byrnes and Ms. Rolfe, and their terms will expire at our 2025 annual meeting of stockholders;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the Class II directors are Mr. Atwood and Ms. LaPorte, and their terms will expire at our 2026 annual meeting of stockholders; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the Class III directors are Mr. Ehrlich and Mr. Patel, and their terms will expire at our 2027 annual meeting of stockholders.</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our Bylaws provide that the
number of members of our board of directors shall be fixed in accordance with our Charter. Our Charter provides that the authorized number
of directors may be changed only by resolution of the board of directors. Any additional directorships resulting from an increase in the
number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of
the directors. Our board of directors is currently fixed at seven members. The division of our board of directors into three classes with
staggered three-year terms may delay or prevent a change of our board of directors or a change in control of our company. Our directors
may be removed only for cause by the affirmative vote of the holders of at least two-thirds of our outstanding voting stock then entitled
to vote in an election of directors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Director Attendance at Annual Meeting of
Stockholders</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We encourage our directors
to attend our annual meetings of stockholders. We did not hold an annual meeting of stockholders during the fiscal year ended December
31, 2023. &#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Board and Committee Meetings</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">During the fiscal year ended
December&#160;31, 2023, our board of directors met four times, our Audit Committee met four times, our Compensation Committee and our
nominating and corporate governance committee met zero times. Each board member attended 75% or more of the aggregate number of meetings
of the board of directors and meetings of the committees on which he or she served during the fiscal year ended December&#160;31, 2023,
for which he or she was a director or committee member.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Board Leadership Structure</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our board of directors does
not have a policy regarding separation of the roles of Chief Executive Officer and chairman of the board of directors. Our board of directors
recognizes that it is important to determine an optimal board leadership structure to ensure the independent oversight of management as
we continue to grow, and believes it is in our best interests to make determinations regarding such leadership structure based on circumstances
from time to time. Currently, our Chief Executive Officer serves as the chairman of the board of directors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our board of directors believe
that this leadership structure, combined with our corporate governance policies and processes, creates an appropriate balance between
strong and consistent leadership and independent oversight of our business. The chairman chairs the meetings of our board of directors
and stockholders, with input from the independent directors, and as such, our board of directors believes that a person with comprehensive
knowledge of our company is in the best position to serve such role. In making this determination, the board of directors considered,
among other matters, Mr. Ehrlich&#8217;s management of our business on a day-to-day basis coupled with his direct involvement in our business
operations, and believed that Mr. Ehrlich is highly qualified to act as both chairman and Chief Executive Officer due to his experience,
knowledge and history with both Legacy CERo and PBAX.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, each of our
other directors is &#8220;independent&#8221; under Nasdaq standards. Our independent vice chairman presides over regularly-held executive
sessions of independent directors, without management present, and all of our independent directors are active in the oversight of our
company. In addition, our board of directors and each committee of board of directors has complete and open access to any member of management
and the authority to retain independent legal, financial and other advisors as they deem appropriate.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our board of directors believe
its administration of its risk oversight function has not affected its leadership structure. Risk is inherent with every business, and
how well a business manages risk can ultimately determine its success. Our board of directors is actively involved in oversight of risks
that could affect us. This oversight is conducted primarily by our full board of directors, which has responsibility for general oversight
of risks, and the Audit Committee, which has responsibility for reviewing the adequacy of our risk management activities with management
and our independent registered public accounting firm.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">At each of its meetings,
the board of directors receives business updates from various members of management. These updates may identify matters that have emerged
within that member of management&#8217;s scope of responsibility that involve operational, financial, legal or regulatory risks and, in
these cases, the board of directors provides guidance to management. Our board of directors believes that full and open communication
between management and the board of directors is essential for effective risk management and oversight.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our board of directors has
concluded that our current leadership structure is appropriate at this time. However, our board of directors will continue to periodically
review our leadership structure and may make such changes in the future as it deems appropriate.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Role of Board in Risk Oversight</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our board of directors has
responsibility for the oversight of our risk management processes and, either as a whole or through its committees, regularly discusses
with management our major risk exposures, their potential impact on our business and the steps we take to manage them. The risk oversight
process includes receiving regular reports from board committees and members of senior management to enable our board of directors to
understand our risk identification, risk management and risk mitigation strategies with respect to areas of potential material risk, including
operations, finance, legal, regulatory, strategic and reputational risk. &#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Audit Committee reviews
information regarding liquidity and operations, and oversees our management of financial risks. It also reviews information and policies
related to information technology risk, including cyber-security and incident response planning. Periodically, the Audit Committee reviews
our policies with respect to risk assessment, risk management, loss prevention and regulatory compliance. Oversight by the Audit Committee
includes direct communication with our external auditors, and discussions with management regarding significant risk exposures and the
actions management has taken to limit, monitor or control such exposures. The Compensation Committee is responsible for assessing whether
any of our compensation policies or programs has the potential to encourage excessive risk-taking. The nominating and corporate governance
committee manages risks associated with the independence of the board of directors, corporate disclosure practices and potential conflicts
of interest. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire
board of directors is regularly informed through committee reports about such risks. Matters of significant strategic risk are considered
by our board of directors as a whole.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Committees of the Board of Directors</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The standing committees of
our board of directors include the Audit Committee, a Compensation Committee, and a nominating and corporate governance committee, each
of which operates under a charter that has been approved by our board of directors. Such charters are available on our website at <i>www.cero.bio/investors</i>.
The reference to our website address does not constitute incorporation by reference of the information contained at or available through
our website. We have included our website address as an inactive textual reference only.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Audit Committee</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The members of our Audit
Committee are Mr. Byrnes, Dr. Rolfe and Mr. Patel. Mr. Byrnes serves as the chairperson of the Audit Committee. All members of our Audit
Committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and Nasdaq. Our board of
directors has determined that Mr. Byrnes is an &#8220;audit committee financial expert&#8221; as defined by applicable SEC rules and has
the requisite financial sophistication as defined under the applicable Nasdaq listing standards. Our board of directors has determined
each of Mr. Byrnes, Dr. Rolfe and Mr. Patel is independent under the applicable rules of the SEC and Nasdaq and has the requisite financial
expertise required under the applicable requirements of Nasdaq. In arriving at this determination, our board of directors has examined
each Audit Committee member&#8217;s scope of experience and the nature of their experience reading and understanding financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Audit Committee&#8217;s
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The Audit Committee&#8217;s responsibilities include, among other things:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Compensation Committee</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The members of our Compensation
Committee are Ms. LaPorte, Dr. Rolfe and Mr. Patel. Ms. LaPorte serves as the chairperson of the Compensation Committee. Our board of
directors has determined that each of Ms. LaPorte, Dr. Rolfe and Mr. Patel is independent under the applicable Nasdaq listing standards
and is a &#8220;non-employee director&#8221; as defined in Rule 16b-3 promulgated under the Exchange Act.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our Compensation Committee&#8217;s
main function is to oversee our compensation structure, policies and programs and to review the processes and procedures for the consideration
and determination of director and executive compensation. The Compensation Committee&#8217;s responsibilities include, among other things:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="width: 0.25in">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="width: 0.25in">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Nominating and Corporate Governance Committee</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The members of our nominating
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board of directors has determined that each of Dr. Rolfe, Ms. LaPorte and Mr. Byrnes is independent under the applicable Nasdaq listing
standards.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 162; Value: 1 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The nominating and corporate
governance committee&#8217;s main function is to consider candidates for board membership and oversee our corporate governance policies,
reporting and making recommendations to our board of directors concerning governance matters and oversight of the evaluation of our board
of directors. The nominating and corporate governance committee&#8217;s responsibilities include, among other things:</p><div>

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</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="width: 0.25in">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Director Nomination Process</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our board of directors is
responsible for filling vacancies on our board of directors and for nominating candidates for election by our stockholders each year in
the class of directors whose term expires at the relevant annual meeting. The board of directors delegates the selection and nomination
process to the nominating and corporate governance committee, with the expectation that other members of the board of directors, and of
management, will be requested to take part in the process as appropriate.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The nominating and corporate
governance committee considers candidates for board of director membership suggested by its members and our Chief Executive Officer. Additionally,
in selecting nominees for directors, the nominating and corporate governance committee will review candidates recommended by stockholders
in the same manner and using the same general criteria as candidates recruited by the committee and/or recommended by our board of directors.
The nominating and corporate governance committee may gather information about the candidates through interviews, detailed questionnaires,
comprehensive background checks or any other means that the nominating and corporate governance committee deems to be appropriate in the
evaluation process.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our nominating and corporate
governance committee and our board of directors consider a broad range of factors relating to the qualifications of nominees. Our nominating
and corporate governance committee&#8217;s and our board of directors&#8217; priority in selecting board members is the identification
of persons who will provide a composite mix of backgrounds, experience, knowledge and capabilities that will allow our board of directors
to promote our strategic objectives and fulfill its responsibilities to our stockholders. Our nominating and corporate governance committee
and our board of directors highly value diversity and, as such, also consider diversity of gender, race, ethnicity, age, gender identity,
gender expression and sexual orientation when selecting members of our board of directors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Any stockholder who wishes
to recommend a candidate for consideration by the committee as a nominee for director should follow the procedures described in our proxy
statement to be filed with the SEC in connection with our 2024 special meeting of stockholders within 120 days after the end of the fiscal
year ended December 31, 2023. The nominating and corporate governance committee will also consider whether to nominate any person proposed
by a stockholder in accordance with the provisions of our Bylaws relating to stockholder nominations.</p><div>

</div><p style="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">During the fiscal year ended
December 31, 2023, Mr. Ehrlich served as the Chief Executive Officer of our predecessor, PBAX. In connection with the Business Combination,
on February 14, 2024, Mr. Ehrlich ceased to be an officer of PBAX. Mr. Ehrlich served as a member of our Compensation Committee from the
closing of the Business Combination until his appointment as our interim Chairman and Chief Executive Officer. Other than Mr. Ehrlich,
during the fiscal year ended December 31, 2023, none of the members of our Compensation Committee has ever been one of our officers or
employees. None of our executive officers currently serves, or has served, as a member of our board of directors or Compensation Committee
of any entity that has one or more executive officers serving as a member of our board of directors or Compensation Committee.</p><div>

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is critical to our success. While we do not have a formal policy on board of directors diversity, the board of directors is committed
to building a board of directors that consists of the optimal mix of skills, expertise, and diversity capable of effectively overseeing
the execution of our business and meeting our evolving needs, with diversity reflecting gender, age, race, ethnicity, background, professional
experience and perspectives. Our nominating and corporate governance committee considers the value of diversity on the board of directors
in evaluating director nominees. Accordingly, the nominating and corporate governance committee&#8217;s evaluation of director nominees
includes consideration of their ability to contribute to the diversity of personal and professional experiences, opinions, perspectives
and backgrounds on the board of directors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The matrix below provides
certain highlights of the composition of our board of directors based on self-identification. Each term used above and in the matrix below
has the meaning given to it in Nasdaq Listing Rule 5605(f).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Communication with Directors</b></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Any stockholder or interested
party may communicate with our board of directors, as a whole, or with individual directors on the board of directors, through an established
process for stockholder and other interested party communication. For a communication directed to the board of directors as a whole, stockholders
and other interested parties may submit a written communication by postal mail to the attention of the chairman of our board of directors
at the following address: CERo Therapeutics Holdings, Inc., 210 Haskins Way, Suite 230, South San Francisco, CA 94080.</p><div>

</div><p style="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">For a communication directed
to an individual director in his capacity as a member of the board of directors, stockholders and other interested parties may send such
communication to the attention of the individual director at the following address: CERo Therapeutics Holdings, Inc., c/o&#160;Corporate
Secretary, 210 Haskins Way, Suite 230, South San Francisco, CA 94080, Attention: Michael Byrnes.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We will forward by U.S. mail
any such communication to each director, and the chairman of the board of directors in his capacity as a representative of the board of
directors, to whom such communication is addressed to the address specified by each such director and the chair of the board of directors,
unless there are safety or security concerns that mitigate against further transmission. A copy of any such written communication may
also be forwarded to our general counsel and a copy of such communication may be retained for a reasonable period of time. You may submit
your concern anonymously or confidentially.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Communications may be forwarded
to other directors if they relate to important substantive matters and include suggestions or comments that may be important for other
directors to know. In general, communications relating to corporate governance and long-term corporate strategy are more likely to be
forwarded than communications relating to ordinary business affairs, personal grievances and matters as to which we tend to receive repetitive
or duplicative communications.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Code of Business Conduct and Ethics</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We have adopted a written
code of business conduct and ethics that applies to our directors, officers, and employees, including our principal executive officer,
principal financial officer, principal accounting officer or controller, or persons performing similar functions. Our code of business
conduct and ethics is available under the Investors section of our website at <i>www.cero.bio/investors</i>. In addition, we intend to
post on our website all disclosures that are required by law or the listing standards of Nasdaq concerning any amendments to, or waivers
from, any provision of the code of business conduct and ethics. The reference to our website address does not constitute incorporation
by reference of the information contained at or available through our website. We have included our website address as an inactive textual
reference only.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Insider Trading Arrangements and Policies</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">During the three months ended
December 31, 2023, none of our directors or officers adopted, amended, or terminated a &#8220;Rule 10b5-1 trading arrangement&#8221; or
&#8220;non-Rule 10b5-1 trading arrangement,&#8221; as each term is defined in Item 408(a) of Regulation S-K.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our board of directors has
adopted an insider trading policy which governs the purchase, sales, and/or other dispositions of our securities by directors, officers,
and employees. Our insider trading policy is attached hereto as Exhibit 19 and incorporated herein. In addition, we have adopted a Rule
10b5-1 trading plan policy, which permits our officers, directors, and certain other persons to enter into trading plans complying with
Rule 10b5-1 under the Exchange Act. Generally, under these trading plans, the individual relinquishes control over the transactions once
the trading plan is put into place and can only put such plans into place while the individual is not in possession of material non-public
information. Accordingly, sales under these plans may occur at any time, including possibly before, simultaneously with, or immediately
after significant events involving us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Policy on Trading, Pledging and Hedging of Company Stock</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Certain transactions in our
securities (such as purchases and sales of publicly traded put and call options, and short sales) create a heightened compliance risk
or could create the appearance of misalignment between management and stockholders. In addition, securities held in a margin account or
pledged as collateral may be sold without consent if the owner fails to meet a margin call or defaults on the loan, thus creating the
risk that a sale may occur at a time when an officer or director is aware of material, non-public information or otherwise is not permitted
to trade in our securities. Our insider trading policy expressly prohibits derivative transactions of our stock by our executive officers,
directors and employees. In addition, our insider trading policy also expressly prohibits purchases of any derivative securities that
provide the economic equivalent of ownership.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_018"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>EXECUTIVE COMPENSATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-variant: small-caps"><b>&#160;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Except as otherwise specified
in this Executive Compensation section, the information set forth herein relates to the executive compensation paid by Legacy CERo prior
to the Business Combination, and agreements with us, effective as of the Business Combination. PBAX did not pay any compensation to any
of its directors or executive officers at any time from its Initial Public Offering through the completion of the Business Combination.
This section discusses the material components of the executive compensation program for our named executive officers. Our only named
executive officer for the fiscal year ended December&#160;31, 2023 was Dr. Corey, as Dr.&#160;Corey was the only executive officer during
the period presented.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>2023 Summary Compensation Table</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">None of PBAX&#8217;s executive
officers received any compensation for services rendered in 2023. The following table presents all of the compensation awarded to the
sole named executive officer of Legacy CERo during the years listed below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; border-bottom: Black 1.5pt solid">Name and Principal Position</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Year</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Salary<br/> ($)</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>All Other Compensation ($)<sup>(1)</sup></b></span></td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Total <br/> ($)</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 52%; text-align: left; text-indent: -0.125in; padding-left: 0.125in">Dr.&#160;Daniel Corey</td><td style="width: 1%">&#160;</td>
    <td style="width: 11%; text-align: center">2023</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">360,000</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">16,035</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">376,035</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="font-style: italic; text-align: left; text-indent: -0.125in; padding-left: 0.25in">Former Chief Technology Officer and Former Chief Executive Officer</td><td>&#160;</td>
    <td style="text-align: center">2022</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">360,000</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">12,685</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">372,685</td><td style="text-align: left">&#160;</td></tr>
  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The amounts reported in this column represent (i)&#160;$13,200 in Company contributions made under our 401(k)&#160;plan and (ii)&#160;$2,835 in Company-paid life insurance premiums during the fiscal year ended December 31, 2023 and, for the fiscal year ended December 31, 2022, (i)&#160;$9,400 in Company contributions made under our 401(k)&#160;plan and (ii)&#160;$3,285 in Company-paid life insurance premiums.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Narrative Disclosure to the 2023 Summary Compensation Table</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Compensation of our named
executive officer for the fiscal year ended December 31, 2023 was determined and recommended by the compensation committee, and approved
by the board of directors. The compensation committee engaged a compensation consulting firm to provide and structure benchmarking data
for similar positions in similar companies.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>2023 Base Salaries</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The named executive officer&#8217;s
base salary is a fixed component of annual compensation for performing specific duties and functions. Dr. Corey&#8217;s base salary is
adjusted from time to time to realign with market levels after taking into account individual responsibilities, performance and experience.
For the fiscal year ended December 31, 2023, Dr. Corey&#8217;s annual base salary was $360,000.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Perquisites</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We generally do not provide
perquisites to our employees, other than certain de minimis perquisites available to all of our employees, including our named executive
officers.&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 24.5pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>401(k) Plan</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We maintain the CERo Therapeutics
401(k) Plan, a tax-qualified retirement plan that provides eligible employees, including the named executive officer, with an opportunity
to save for retirement on a tax-advantaged basis. Plan participants are able to defer eligible compensation subject to applicable annual
limits under the Code. Participants&#8217; pre-tax or Roth contributions are allocated to each participant&#8217;s individual account
and are then invested in selected investment alternatives according to the participants&#8217; directions. Participants are immediately
and fully vested in their contributions. We match each participant&#8217;s contribution up to a safe harbor maximum of 4% of his or her
eligible compensation with participants vesting immediately and fully in such matching contributions. Our 401(k) plan is intended to be
qualified under Section 401(a) of the Code with the 401(k) plan&#8217;s related trust intended to be tax exempt under Section 501(a) of
the Code.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Health and Welfare Benefits</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We provide benefits to our
named executive officer on the same basis as provided to all of its employees, including health, dental and vision insurance, as well
as life and disability insurance. Legacy CERo did not, and we will not, maintain any executive-specific benefit or perquisite programs.
Benefits were and are anticipated to be offered on the same basis as provided to all of our employees.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Outstanding Equity Awards as of December&#160;31,
2023</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">There were no outstanding
equity incentive plan awards held by the named executive officer as of December&#160;31, 2023.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Overview of Executive Compensation Program</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our Compensation Committee
anticipates annually reviewing the compensation of our employees, including our executive officers. In setting executive base salaries
and bonuses and granting equity incentive awards, the Compensation Committee considers compensation for comparable positions in the market,
the historical compensation levels of our executive officers, individual performance as compared to our expectations and objectives, internal
equity, our desire to motivate our employees to achieve short- and long-term results that are in the best interests of our stockholders,
and a long-term commitment to us. We intend to target a general competitive position and consider independent third-party benchmark analytics
to determine the mix of compensation of base salary, bonus and long-term incentives.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We engaged the services of
an external compensation consultant to advise on executive compensation matters including our overall compensation program design and
collection of market data to inform our compensation programs for our executive officers and members of our board of directors. The compensation
for our executive officers will have the following components: base salary, cash bonus opportunities, equity compensation, employee benefits,
and severance protections. Base salaries, employee benefits, and severance protections are designed to attract and retain senior management
talent. Annual cash bonuses and equity awards are used to promote performance-based pay that aligns the interests of the named executive
officers with the long-term interests of our stockholders and enhances executive retention.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Employment Arrangements</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We are party to employment
agreements with each of our named executive officers. The arrangements generally provide for at-will employment without any specific term
and set forth the named executive officer&#8217;s initial base salary, bonus potential, eligibility for employee benefits and severance
benefits upon a qualifying termination of employment, subject to such employee executing a separation agreement with us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Employment Agreement with Mr. Atwood</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On March 26, 2024, we entered
into an employment agreement with Mr. Atwood, our Chairman and Chief Executive Officer the (&#8220;Atwood Employment Agreement&#8221;).
Pursuant to the Atwood Employment Agreement, Mr. Atwood is entitled to an initial annual base salary of $360,000, an initial target annual
incentive bonus of 50% of Mr. Atwood&#8217;s base salary, an initial equity grant, and general eligibility to participate in our employee
benefit plans.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Atwood Employment Agreement
provides that in the event Mr. Atwood&#8217;s employment is terminated by us without &#8220;cause&#8221; (other than as a result of Mr.
Atwood&#8217;s death or disability) or by Mr. Atwood with &#8220;good reason&#8221; (each as defined in the Atwood Employment Agreement),
in either case within thirty days before or within twelve months following a &#8220;change in control&#8221; (as defined in the Atwood
Employment Agreement) (the &#8220;Atwood Change in Control Period&#8221;), then, Mr. Atwood will be entitled to: (1) a lump sum cash payment
equal to three months of his then-current base salary, and (2) full acceleration of the vesting of all his outstanding equity awards.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Atwood Employment Agreement
provides that in the event Mr. Atwood&#8217;s employment is terminated by us without &#8220;cause&#8221; (other than as a result of Mr.
Atwood&#8217;s death or disability) or by Mr. Atwood for &#8220;good reason,&#8221; in either case, outside of the Atwood Change in Control
Period, then, Mr. Atwood will be entitled to a lump sum cash payment equal to three months of his then-current base salary.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Atwood Employment Agreement
provides that in the event Mr. Atwood&#8217;s employment terminate as a result of Mr. Atwood&#8217;s death or disability, then, Mr. Atwood
will be entitled to accelerated vesting of 50% of the then-unvested portion of outstanding equity awards.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Mr. Atwood&#8217;s benefits
after termination (other than as a result of death or disability) are conditioned, among other things, on him timely signing and not revoking
a general release of claims in our favor.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The payments and benefits
under the Atwood Employment Agreement in connection with a change in control may not be eligible for federal income tax deduction by us
pursuant to Section 280G of the Code. These payments and benefits may also be subject to an excise tax under Section 4999 of the Code.
If the payments or benefits payable to Mr. Atwood in connection with a change in control would be subject to the excise tax imposed under
Section 4999 of the Code, then those payments or benefits will be reduced if such reduction would result in a higher net after-tax benefit
to him.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Mr. Atwood resigned from
his position as Chief Executive Officer, effective on September 30, 2024. In connection with such resignation, on September 30, 2024,
Mr. Atwood and the Company entered into a consulting agreement (the &#8220;Atwood Consulting Agreement&#8221;), effective October 1, 2024,
pursuant to which Mr. Atwood will provide consulting services for a period of 12 months following his resignation. Mr. Atwood will receive
a consulting fee of $25,000 per quarter. In connection with his entry into the Atwood Consulting Agreement, Mr. Atwood forfeited all 1,331,813
of his outstanding options, and received an award of 508,000 options to purchase shares of Common Stock, which will vest (i) 50% upon
the FDA&#8217;s acceptance of the Company&#8217;s IND and (ii) 50% upon the completion of a financing transaction generating at least
$1.5 million of gross proceeds, in each case subject to Mr. Atwood&#8217;s continued service with the Company.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Employment Agreement with Mr. Carter</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On March 26, 2024, we entered
into an employment agreement with Mr. Carter, our Chief Financial Officer and Corporate Secretary (the &#8220;Carter Employment Agreement&#8221;).
Pursuant to the Carter Employment Agreement, Mr. Carter is entitled to an initial base salary of $350,000 and an initial target annual
incentive bonus of 35% of Mr. Carter&#8217;s base salary, an initial equity grant, and general eligibility to participate in our employee
benefit plans.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Carter Employment Agreement
provides that in the event Mr. Carter&#8217;s employment is terminated by us without &#8220;cause&#8221; (other than as a result of Mr.
Carter&#8217;s death or disability) or by Mr. Carter with &#8220;good reason&#8221; (each as defined in the Carter Employment Agreement),
in either case within thirty days before or within twelve months following a &#8220;change in control&#8221; (as defined in the Carter
Employment Agreement) (the &#8220;Carter Change in Control Period&#8221;), then, Mr. Carter will be entitled to: (1) continued payment
of his then-current base salary for a period of twelve months following his termination, (2) if Mr. Carter timely elects COBRA health
continuation, payment of COBRA premiums for continued health benefits for up to twelve months following his termination for him and his
eligible dependents who were covered under our health insurance plans on the date of such termination, (3)&#160;his annual target bonus
for the year of termination, and (4) full acceleration of the vesting of all his outstanding equity awards.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Carter Employment Agreement
provides that in the event Mr. Carter&#8217;s employment is terminated by us without &#8220;cause&#8221; (other than as a result of Mr.
Carter&#8217;s death or disability) or by Mr. Carter for &#8220;good reason,&#8221; in either case, outside of the Carter Change in Control
Period, then, Mr. Carter will be entitled to (1) continued payment of his then-current base salary for a period of nine months, and (2)
if Mr. Carter timely elects COBRA health continuation, payment of COBRA premiums for continued health benefits for up to nine months following
his termination for him and his eligible dependents who were covered under our health insurance plans on the date of such termination.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Carter Employment Agreement
provides that in the event Mr. Carter&#8217;s employment terminate as a result of Mr. Carter&#8217;s death or disability, then, Mr. Carter
will be entitled to accelerated vesting of 50% of the then-unvested portion of outstanding equity awards.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Mr. Carter&#8217;s benefits
after termination (other than as a result of death or disability) are conditioned, among other things, on him timely signing and not revoking
a general release of claims in our favor.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The payments and benefits
under the Carter Employment Agreement in connection with a change in control may not be eligible for federal income tax deduction by us
pursuant to Section 280G of the Code. These payments and benefits may also be subject to an excise tax under Section 4999 of the Code.
If the payments or benefits payable to Mr. Carter in connection with a change in control would be subject to the excise tax imposed under
Section 4999 of the Code, then those payments or benefits will be reduced if such reduction would result in a higher net after-tax benefit
to him.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Mr. Carter resigned from
his position as Chief Financial Officer, effective on September 30, 2024. In connection with such resignation, Mr. Carter forfeited all
495,397 of his outstanding options.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Offer Letter with Dr. Corey</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On March 28, 2024, we entered
into an employment agreement with Dr. Corey, our Chief Technology Officer and Founder (the &#8220;Corey Offer Letter&#8221;). Pursuant
to the Corey Offer Letter, Dr. Corey is entitled to an initial annual base salary of 350,000, an initial target annual incentive bonus
of 50% of Dr. Corey&#8217;s base salary, an initial equity grant, and general eligibility to participate in our employee benefit plans.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Corey Offer Letter provides
that in the event Dr. Corey&#8217;s employment is terminated by us without &#8220;cause&#8221; or by Dr. Corey for &#8220;good reason&#8221;
(each as defined in the Corey Offer Letter) within 90 days before or within twelve months following a &#8220;change in control&#8221;
(as defined in the Corey Offer Letter) (the &#8220;Corey Change in Control Period&#8221;), then Mr. Corey will be entitled to full acceleration
of the vesting of any options to purchase shares of our common stock that are subject to time-based vesting.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Corey Offer Letter provides
that in the event Dr. Corey&#8217;s employment is terminated by us without &#8220;cause&#8221; or by Dr. Corey for &#8220;good reason,&#8221;
Dr. Corey will be entitled to: (1) the continued payment of his then-current base salary for a period of up to six months following his
termination, and (2) if Dr. Corey timely elects COBRA health continuation, payment of COBRA premiums for continued health benefits for
up to six months following his termination.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Dr. Corey&#8217;s benefits
after termination outside of the Corey Change in Control Period are conditioned, among other things, on him complying with his post-termination
obligations under his agreement, including a one-year non-solicitation obligation, and his timely signing a general release of claims
in our favor.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Dr. Corey resigned from his
position as Chief Technology Officer, effective September 23, 2024. In connection with such resignation, Dr. Corey forfeited 461,285 of
his outstanding options.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Consulting Agreement with Mr. Ehrlich</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On September 30, 2024, we
entered into a consulting agreement with Chris Ehrlich (the &#8220;Ehrlich Consulting Agreement&#8221;), effective October 1, 2024. The
Ehrlich Consulting Agreement has an initial term of twelve months, commencing October 1, 2024, as may be extended by mutual written agreement.
Mr. Ehrlich will receive a consulting fee of $30,000 per month. In connection with his entry into the Ehrlich Consulting Agreement, Mr.
Ehrlich forfeited all 572,182 of his outstanding options, and received an award of 2,555,000 options to purchase shares of Common Stock,
which will vest (i) 50% upon the FDA&#8217;s acceptance of the Company&#8217;s IND and (ii) 50% upon the completion of a financing transaction
generating at least $1.5 million of gross proceeds, in each case subject to Mr. Ehrlich&#8217;s continued service.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><i>&#160;</i>&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Consulting Agreement with Mr. Kucharchuk</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On September 30, 2024, we
entered into a consulting agreement with Andrew &#8220;Al&#8221; Kucharchuk (the &#8220;Kucharchuk Consulting Agreement&#8221;). The Kucharchuk
Consulting Agreement has an initial term of one year, commencing October 1, 2024, as may be extended by mutual written agreement. Mr.
Kucharchuk received a retainer of $15,000 upon his entry into the Kucharchuk Consulting Agreement, and will receive a monthly fee of $16,000
for his services during the term of the Kucharchuk Consulting Agreement. In addition, Mr. Kucharchuk received an award of 500,000 options
to purchase shares of Common Stock, which will vest in equal monthly installments over twelve months, subject to Mr. Kucharchuk&#8217;s
continued service. Either party may terminate the Kucharchuk Consulting Agreement at any time with at least 30 days&#8217; prior written
notice.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Consulting Agreement with Dr. Pierce</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On September 30, 2024, we
entered into a consulting agreement with Kristen Pierce (the &#8220;Pierce Consulting Agreement&#8221;), effective as of October 1, 2024.
The Pierce Consulting Agreement has an initial term of twelve months, commencing October 1, 2024, as may be extended by mutual written
agreement. Dr. Pierce will receive a monthly fee of $30,000 for her services during the term of the Pierce Consulting Agreement. In addition,
Dr. Pierce received an award of 200,000 options to purchase shares of Common Stock, which will vest in equal monthly installments over
twenty-four months, subject to Dr. Pierce&#8217;s continued service; provided, that the vesting of 50% such options shall be accelerated
upon the FDA&#8217;s acceptance of our IND. Either party may terminate the Pierce Consulting Agreement at any time with at least 30 days&#8217;
prior written notice.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Annual Bonuses</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We use annual cash incentive
bonuses for the named executive officers to motivate their achievement of short-term performance goals and tie a portion of their cash
compensation to performance. It is expected that, near the beginning of each year, the Compensation Committee will select the performance
targets, target amounts, target award opportunities and other terms and conditions of annual cash bonuses for the named executive officers,
subject to the terms of their employment agreements. Following the end of each year, the Compensation Committee will determine the extent
to which the performance targets were achieved and the amount of the award that is payable to each of the named executive officers. A
bonus plan was established for executive officers in 2024.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Equity Incentive Compensation</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We believe it is important
to maintain a strong link between executive incentives and the creation of stockholder value. We believe performance and equity-based
compensation for our executives to be an important component of maximizing stockholder value while, at the same time, attracting, motivating
and retaining high-quality executives. Upon consummation of the Business Combination, we assumed options issued pursuant to the CERo Therapeutics,
Inc. 2016 Equity Incentive Plan, as amended (the &#8220;2016 Plan&#8221;), and we currently maintain the CERo Therapeutics Holdings, Inc.
2024 Equity Incentive Plan (the &#8220;2024 Plan&#8221;) and the CERo Therapeutics Holdings, Inc. 2024 Employee Stock Purchase Plan (the
&#8220;2024 ESPP&#8221;).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">As of December 31, 2023,
the 2016 Plan had options outstanding to purchase a total of 782,499 shares of common stock for a weighted average exercise price of $0.28
per share. On February 14, 2024, upon consummation of the Business Combination, these options were assumed by us and converted into options
to purchase shares in CERo at a conversion rate of 0.064452 underlying shares per legacy share and a strike price calculated as the legacy
strike price divided by 0.064452. This resulted in the issuance of options to purchase 50,433 shares of common stock at a weighted average
price of $4.36.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">As of October 1, 2024, the
board of directors has approved option awards to the executive officers for 2024, as set forth below:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; text-align: justify; border-bottom: Black 1.5pt solid">Name and Position</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Stock<br/> Options</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 88%; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Chris Ehrlich, <i>Chief Executive Officer and Chairman </i><b><sup>(1)</sup></b></span></td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">2,555,000</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Andrew &#8220;Al&#8221; Kucharchuk, <i>Chief Financial Officer</i></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">500,000</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Kristen Pierce, <i>Chief Development Officer</i></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">265,898</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Brian G. Atwood, <i>Former Chief Executive Officer and Chairman </i><b><sup>(2)</sup></b></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">508,000</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Charles R. Carter, <i>Former Chief Financial Officer </i><b><sup>(3)</sup></b></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Daniel Corey, M.D., <i>Former Chief Technology Officer </i><b><sup>(4)</sup></b></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">395,386</td><td style="text-align: left">&#160;</td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Excludes 527,182 options granted under the 2024 Plan which were forfeited on September 30, 2024.</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Excludes 1,331,813 options granted under the 2024 Plan which were forfeited on September 30, 2024.</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(3)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Excludes 495,387 options granted under the 2024 Plan which were forfeited on September 30, 2024.</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(4)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Excludes 461,285 options granted under the 2024 Plan which were forfeited on September 23, 2024.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Compensation Recovery Policy</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our board of directors adopted
a Compensation Recovery Policy (the &#8220;Compensation Recovery Policy&#8221;), in compliance with the Nasdaq listing rules, which requires
recovery from executive officers of incentive-based compensation that is earned, granted or vested based on the achievement of a financial
reporting measure in the event of a required accounting restatement of previously issued financial statements. The recoverable compensation
includes any compensation received after the effective date of the Compensation Recovery Policy and in the three-year fiscal period preceding
the date we were required to prepare the accounting restatement that is in excess of the amount that would have been earned, paid or vested
had it been calculated based on the restated financial statements. Recovery is required regardless of fault or a covered officer&#8217;s
role in the financial reporting process. The Compensation Recovery Policy is filed as Exhibit 97.1 to our Annual Report on Form 10-K for
the year ended December 31, 2023.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Rule&#160;10b5-1 Sales Plans</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our directors and executive
officers may adopt written plans, known as Rule&#160;10b5-1 plans, in which they will contract with a broker to buy or sell shares of
common stock on a periodic basis. Under a Rule&#160;10b5-1 plan, a broker executes trades pursuant to parameters established by the director
or executive officer when entering into the plan, without further direction from them. The director or executive officer may amend a Rule&#160;10b5-1
plan in some circumstances and may terminate a plan at any time. Our directors and executive officers also may buy or sell additional
shares outside of a Rule&#160;10b5-1 plan when they are not in possession of material nonpublic information, subject to compliance with
the terms of the insider trading policy.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>


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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_019"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>DIRECTOR COMPENSATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-variant: small-caps"><b>&#160;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">None of our directors received
compensation in 2023 for services rendered to PBAX or Legacy CERo, with the exception of Dr. Corey, who was compensated for his service
as our Chief Executive Officer. Dr. Corey is a named executive officer and his compensation is provided in the &#8220;<i>Summary Compensation
Table</i>&#8221; above.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On March 25, 2024, the board
of directors approved the compensation for non-employee directors for 2024. Each non-employee director other than the vice chairman will
receive $30,000 per annum, paid quarterly in advance. In addition, each non-employee director other than the vice chairman shall receive
an option award to purchase 112,500 shares of common stock. Such option awards vest quarterly over a three-year period and expire ten
years after the grant date. The vice chairman will receive $150,000 per annum, paid quarterly in advance. In addition, the vice chairman
shall receive an option award to purchase 527,182 shares of common stock. Such option awards vest quarterly over a three-year period and
expire ten years after the grant date.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On September 30, 2024, the
board of directors approved the grant of 255,000 options to each of our non-employee directors, which will vest (i) 50% upon the FDA&#8217;s
acceptance of our IND and (ii) 50% upon the completion of a financing transaction generating at least $1.5 million of gross proceeds,
in each case subject to such director&#8217;s continued service.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Mr. Atwood and Dr. Corey
have not received and will not receive additional compensation for their additional duties as directors in 2024. Mr. Atwood and Dr. Corey&#8217;s
compensation is summarized above in &#8220;<i>Executive Compensation&#8212;Employment Agreements</i>.&#8221;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_020"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PRINCIPAL STOCKHOLDERS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-variant: small-caps"><b>&#160;</b></span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The following table sets
forth information regarding the beneficial ownership of our common stock as of December 16, 2024, by:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 48px">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">each person known by us to be the beneficial owner of more than 5% of our outstanding shares of Common Stock;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 48px">&#160;</td>
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">each of our named executive officers and directors that beneficially owns shares of our Common Stock; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 48px">&#160;</td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Beneficial ownership is determined
in accordance with the rules and regulations of the SEC, which generally provide that a person has beneficial ownership of a security
if he, she or it possesses sole or shared voting or investment power over that security. Shares of our Common Stock subject to options,
warrants or shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock that are currently exercisable or
convertible or exercisable or convertible within 60 days or shares of Common Stock underlying time-based restricted stock units that vest
within 60 days are considered outstanding and beneficially owned by the person holding the options, warrants, shares of preferred stock
or restricted stock units, as applicable, for the purpose of calculating the percentage ownership of that person but not for the purpose
of calculating the percentage ownership of any other person. Accordingly, the ownership percentage of such persons presented below assumes
the exercise or conversion of derivative securities held thereby without assuming exercise or conversion of securities of the same type
held by any other persons and, accordingly, is greater than the percentage that would be owned by such persons if all of the holders of
securities of the same type exercised or converted such securities. Unless otherwise indicated, we believe that the persons and entities
named in the table below have sole voting and investment power with respect to all of our voting securities beneficially owned by them.
Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares
of Common Stock beneficially owned by them.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The percentage of beneficial
ownership is based on 191,881,107 shares of Common Stock issued and outstanding as of December 16, 2024.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-style: italic; text-align: left">5% or Greater Beneficial Owners:</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">SMS Trust <b><sup>(4)</sup></b></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">21,067,956</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Arch Venture Fund X, L.P. <b><sup>(5)</sup></b></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">14,219,203</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">7,179,254</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Kristen Pierce, Ph.D. <b><sup>(8)</sup></b></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">102,073</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Brian G. Atwood <b><sup>(9)</sup></b></span></td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Michael Byrnes <b><sup>(10)</sup></b></span></td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">155,625</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 4pt">All current directors and executive officers as a group (eight individuals)</td><td style="padding-bottom: 4pt">&#160;</td>
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  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Represents beneficial ownership of less than 1% of our outstanding Common Stock.</span></td></tr>
  </table><div>
</div><p style="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"></p><div>

</div><!-- Field: Page; Sequence: 173; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->159<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 34px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Unless otherwise noted, the business address of each of the following individuals is 210 Haskins Way, Suite 230, South San Francisco, CA 94080.</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</span></td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
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<tr style="vertical-align: top">
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<tr style="vertical-align: top">
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  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
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  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Equity Compensation Plan Information</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">The following table sets forth information as
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-variant: small-caps"><b>&#160;</b></span></p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><div><a id="a_021"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-variant: small-caps"><b>&#160;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Certain Relationships and Transactions </b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="font-variant: small-caps"><b>&#160;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Other than the compensation
agreements and other arrangements described under the sections entitled &#8220;<i>Executive Compensation</i>&#8221; and &#8220;<i>Director
Compensation</i>&#8221; above and the transactions described below, since January&#160;1, 2022, there has not been and there is not currently
proposed, any transaction or series of similar transactions to which we were, or will be, a party in which:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
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  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>PBAX Relationships and Related Party Transactions</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Related&#160;Party Loans</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In order to finance transaction
costs in connection with the Business Combination, the Sponsor or an affiliate of the Sponsor or certain of PBAX&#8217;s officers and
directors may, but are not obligated to, to loan PBAX funds as may be required. On December&#160;13, 2022, PBAX issued an unsecured promissory
note in the principal amount of $1,500,000 (the &#8220;Promissory Note&#8221;) to the Sponsor, pursuant to which the Sponsor agreed to
loan to the PBAX up to $1,500,000. On December&#160;8, 2023, the Promissory Note was amended to increase the total principal amount to
$1,600,000.&#160;At the Closing, an aggregate of approximately $1.55 million that had been borrowed under the Promissory Note was extinguished
and converted into an aggregate of 1,380 shares of Series A Preferred Stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Administrative Services</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Commencing on October&#160;6,
2021, PBAX paid an amount equal to $20,000 per month to the Sponsor or its affiliate or designee for office space, administrative and
shared personnel support services provided to PBAX.&#160;Such administrative support services ended on December&#160;31, 2022.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Advisory Services</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We engaged CCM, an affiliate
of PBAX, the Sponsor and/or certain of its directors and officers, to provide consulting and advisory services in connection with the
IPO, for which it was entitled to a fee in an amount equal to $465,000, which was paid to CCM upon the closing of the IPO, and $1,162,500,
which would have been paid to CCM upon the Closing. In connection with the Closing, PBAX entered into a fee modification agreement with
CCM pursuant to which CCM forfeited such fees and we issued an aggregate of 1,200,000 shares of Common Stock, with 1,000,000 of such shares
being subject to forfeiture unless we conduct a capital-raising transaction within nine months of the Closing, pursuant to which we shall
issue and sell securities in an aggregate amount of at least $25.0 million, affiliates of CCM have and manage investment vehicles with
a passive investment in the Sponsor.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>CERo Relationships and Related Party Transactions</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Collaboration and Option Agreement</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">On March 3, 2020, Legacy
CERo entered into a collaboration and option agreement (&#8220;Collaboration Agreement&#8221;) with a collaborative partner that was an
investor of Legacy CERo, pursuant to which each party was granted a royalty-free, nonexclusive, worldwide license to share the other party&#8217;s
technologies to create bi-functional&#160;T-cells. Legacy CERo was responsible for all employee and other internal costs incurred in the
performance of all of Legacy CERo&#8217;s R&amp;D activities, with approved cost overruns funded by the collaborative partner. At the
end of the research project, the collaborative partner would be granted the option to enter into an exclusive license for the further
development of the combined drug. Under the Collaboration Agreement, the collaborative partner paid us $182,577 and $0 for the years ended
December 31, 2022 and 2023. The Collaboration Agreement terminated on March&#160;3, 2023.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>PIPE Financings</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In February 2024, we issued and sold an aggregate
of 10,039 shares of Series A Preferred Stock, 612,746 Series A Warrants and 2,500 Preferred Warrants, at a price of $1,000 per share of
Series A Preferred Stock, for aggregate cash proceeds of approximately $8.0 million, plus additional cash proceeds of up to $2.0 million
if the Preferred Warrants are exercised.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The following table summarizes the shares of our
Series A Preferred Stock issued to our related parties:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold; border-bottom: Black 1.5pt solid"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Purchasers<sup>(1)</sup></b></span></td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Shares of Series A </b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Preferred Stock</b></p></td><td style="padding-bottom: 1.5pt">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Total<br/>
 Purchase<br/>
 Price</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right">150</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">150,000</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Atwood-Edminster Trust dtd 4-2-2000 <sup>(3)</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,002</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">1,002,000</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Chris Ehrlich<sup>(4)</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">275</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">275,000</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Phoenix Biotech Sponsor, LLC<sup>(5)</sup></span></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">1,380</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">1,380,000</td><td style="text-align: left">&#160;</td></tr>
  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Additional details regarding these stockholders and their equity holdings are included in this prospectus under the section &#8220;<i>Principal Stockholders</i>.&#8221;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(2)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Daniel Corey served as the Chief Technology Officer and a member of the board of directors from February 2024 to September 2024, and previously served as Chief Executive Officer, Chief Scientific Officer, and a member of the board of directors of Legacy CERo until the closing of the Business Combination in February 2024.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(3)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Brian G. Atwood served as Chairman and Chief Executive Officer from February 2024 to September 2024, and previously served as Chairman of PBAX until the closing of the Business Combination in February 2024 Mr. Atwood is a member of the board of directors and serves as a trustee of Atwood-Edminster Trust dtd 4-2-2000.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(4)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Chris Ehrlich has served as the Chairman and Chief Executive Officer since December 2024, and previously served as (i) interim Chairman and Chief Executive Officer from October 2024 to November 2024, (ii) Vice Chairman of the board of directors from February 2024 to September 2024, and (iii) the Chief Executive Officer of PBAX until the closing of the Business Combination in February 2024.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(5)</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Phoenix Biotech Sponsor, LLC beneficially owned more than 5% of our outstanding capital stock at the time of the transaction.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Policies and Procedures for Related Party Transactions</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We have adopted a code of
conduct and ethics requiring us to avoid, wherever possible, all conflicts of interests, except under guidelines or resolutions approved
by the board of directors (or the appropriate committee of the board of directors) or as disclosed in public filings with the SEC. Under
the adopted code of conduct and ethics, conflict of interest situations include any financial transaction, arrangement or relationship
(including any indebtedness or guarantee of indebtedness) involving us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, pursuant to
the Audit Committee charter, our Audit Committee is responsible for reviewing and approving related party transactions to the extent that
we entered into such transactions. An affirmative vote of a majority of the members of the Audit Committee present at a meeting at which
a quorum is present will be required in order to approve a related party transaction. Without a meeting, the unanimous written consent
of all of the members of the Audit Committee will be required to approve a related party transaction. We also require each of our directors
and officers to complete a directors&#8217; and officers&#8217; questionnaire that elicits information about related party transactions.
These procedures are intended to determine whether any such related party transaction impairs the independence of a director or presents
a conflict of interest on the part of a director, employee or officer.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our Audit Committee reviews
on a quarterly basis all payments that were made to the officers or directors, or to their affiliates.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_022"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>DESCRIPTION OF SECURITIES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>General</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We are authorized to issue
up to 1,000,000,000 shares of Common Stock, and 10,000,000 shares of Preferred Stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Preferred Stock</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our Board is authorized to
issue &#8220;blank check&#8221; Preferred Stock, which may be issued in one or more series upon the authorization of the Board. The Board
is authorized to fix the designations, powers, preferences and the relative, participating, optional or other special rights and any qualifications,
limitations and restrictions of the shares of each series of Preferred Stock. The authorized shares of the Preferred Stock are available
for issuance without further action by our stockholders, unless such action is required by applicable law or the rules of any stock exchange
on which the securities may be listed. If the approval of our stockholders is not required for the issuance of shares of the Preferred
Stock, the Board may determine not to seek stockholder approval.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Board will be able to,
without stockholder approval, issue Preferred Stock with voting and other rights that could adversely affect the voting power and other
rights of the holders of the Common Stock and could have anti-takeover effects. The ability of the Board to issue Preferred Stock without
stockholder approval could have the effect of delaying, deferring or preventing a change of control of us or the removal of existing management.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Series A Convertible Preferred Stock</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We designated 12,580 shares
of our authorized and unissued Preferred Stock as Series A Preferred Stock and established the rights, preferences and privileges of the
Series A Preferred Stock pursuant to the Series A Certificate of Designations filed with the Secretary of State of the State of Delaware,
as summarized below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>General</i>. Each share
of Series A Preferred Stock has a stated value of $1,000 per share and, when issued, the Series A Preferred Stock was fully paid and non-assessable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Ranking</i>. The Series
A Preferred Stock, with respect to the payment of dividends, distributions and payments upon the liquidation, dissolution and winding
up of us, ranks senior to all capital stock of us unless the Required Holders (as defined in the Series A Certificate of Designations)
consent to the creation of other capital stock of us that is senior or equal in rank to the Series A Preferred Stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Dividends</i>. The holders
of Series A Preferred Stock will be entitled to dividends, on an as-if converted basis, equal to and in the same form as dividends actually
paid on shares of Common Stock, when and if actually paid.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Purchase Rights</i>. If
at any time we grant, issue or sell any options, convertible securities, or rights to purchase stock, warrants, securities or other property
pro rata to all or substantially all of the record holders of any class of Common Stock (the &#8220;Purchase Rights&#8221;), then each
holder of Series A Preferred Stock will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase
Rights which such holder could have acquired if such holder had held the number of shares of Common Stock acquirable upon complete conversion
of all the Series A Preferred Stock held by such holder immediately prior to the date as of which the record holders of shares of Common
Stock are to be determined for the grant, issue or sale of such Purchase Rights at the Alternate Conversion Price (as defined in the Series
A Certificate of Designations); subject to certain limitations on beneficial ownership.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>Conversion Rights</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Conversion at Option of
Holder</i>. Each holder of Series A Preferred Stock may convert all, or any part, of the outstanding Series A Preferred Stock, at any
time at such holder&#8217;s option, into shares of the Common Stock (which converted shares of Common Stock are referred to as &#8220;Conversion
Shares&#8221; herein) at the fixed &#8220;Conversion Price&#8221; of $10.00, which is subject to proportional adjustment upon the occurrence
of any stock split, stock dividend, stock combination and/or similar transactions.</p><div>

</div><p style="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; text-align: center; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Voluntary Adjustment Right</i>.
Subject to the rules and regulations of the Nasdaq, we have the right, at any time, with the written consent of the Required Holders (as
defined in the Series A Certificate of Designations), to lower the fixed conversion price to any amount and for any period of time deemed
appropriate by the Board.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Alternate Conversion Upon
a Triggering Event</i>. Following the occurrence and during the continuance of a Triggering Event (as defined below), each holder may
alternatively elect to convert the Series A Preferred Stock at the &#8220;Alternate Conversion Price&#8221; equal to the lesser of:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the greater of:</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">80% of the volume weighted average price of the Common Stock during the 5 consecutive trading days immediately prior to such conversion.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Series A Certificate
of Designations contains standard and customary triggering events (each, a &#8220;Series A Triggering Event&#8221;), including but not
limited to: (i) the suspension from trading or the failure to list the Common Stock within certain time periods; (ii) failure to declare
or pay any dividend when due; (iii) the failure to timely file or make effective a registration statement on Form S-1 pursuant to the
Registration Rights Agreement, dated as of February 14, 2024, by and between us and the holders of Series A Preferred Stock party thereto
(the &#8220;PIPE Registration Rights Agreement&#8221;), (iv) our failure to cure a conversion failure of failure to deliver shares of
the Common Stock under the Series A Warrants, Preferred Warrants, and all warrants issued in exchange therefor or replacement thereof
(the &#8220;Structuring Warrants&#8221;) or notice of our intention not to comply with a request for conversion of any Series A Preferred
Stock or a request for exercise of any Structuring Warrants, and (v) bankruptcy or insolvency of us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>July Alternate Conversion
Event</i>. On July 5, 2024, the resale registration statement on Form S-1, which included the shares of Common Stock underlying the conversion
of the Series A Preferred Stock and Series B Preferred Stock, was declared effective. On the effectiveness of this S-1, the conversion
price of the Preferred Stock reset to $1.00 per share. The Series A Certificate of Designations defines a number of conditions that trigger
an Alternate Conversion Right, such right extending from the onset of the condition to 20 trading days after the condition is cured. Due
to late registration, the period of Alternate Conversion Right was from July 5, 2024 to August 2, 2024. The Alternate Conversion Right
triggered by late registration resulted in a 25% premium added to the conversion amount. At the time of Alternate Conversion, the Alternate
Conversion Price is the lowest of (a) the Conversion Price and (b) the greater of (i) the floor price and (ii) 80% of the lowest daily
VWAP of the Common Stock during the five trading days immediately preceding the date of conversion notice submission. However, because
the floor price was greater than 80% of the five-day volume-weighted average price of a share of Common Stock, the conversion amount was
further increased by a multiplier resulting in the convertibility of the shares of Series A Preferred Stock into the number of shares
of Common Stock that would have been issuable if the Alternate Conversion Price had been equal to such lower volume weighted average price.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Other Adjustments</i>.
If 90 days or 180 days following the occurrence of the later of (x) the Stockholder Approval Date (as defined below) and (y) the earlier
of (a) the effective date of the registration statement to be filed pursuant to the PIPE Registration Rights Agreement and (b) the date
that the Series A Preferred Stock is eligible to be resold without restriction under Rule 144 of the Securities Act, the Conversion Price
then in effect is greater than the greater of $1.00 and the Market Price (as defined in the Series A Certificate of Designations) then
in effect (the &#8220;Series A Adjustment Price&#8221;), the Conversion Price shall automatically lower to the Series A Adjustment Price.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Limitations on Conversion</i>.
In no event shall the Series A Preferred Stock be convertible into a number of shares of Common Stock exceeding 19.99% of the total number
of shares of Common Stock outstanding immediately prior to the execution of the applicable Securities Purchase Agreement, except that
such limitation shall not apply in the event that we obtain approval from our stockholders for the issuance of such shares in accordance
with the applicable stock exchange rules (the date of such approval, the &#8220;First Stockholder Approval Date&#8221;).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Bankruptcy Triggering
Event Redemption Right</i>. Upon any bankruptcy Series A Triggering Event, we shall immediately redeem in cash all amounts due under the
Series A Preferred Stock at 25% premium (or, if 18 months following the issuance date, 50% premium) to the greater of (x) the amount of
shares of Series A Preferred Stock then outstanding and (y) the equity value of the shares of Series A Preferred Stock then outstanding,
unless the holder waives such right to receive such payment. The equity value of the Common Stock underlying the Series A Preferred Stock
is calculated using the greatest closing sale price of the Common Stock on any trading day immediately preceding such bankruptcy Series
A Triggering Event and the date we make the entire payment required.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Change of Control Exchange.
</i>Upon a change of control, each holder may require us to exchange the holder&#8217;s shares of Series A Preferred Stock for consideration
equal to the change of Control Election Price (as defined in the Series A Certificate of Designations), to be satisfied at our election
in either (x) cash or (y) rights convertible into such securities or other assets to which such holder would have been entitled with respect
to such shares of Common Stock had such shares of Common Stock been held by such holder upon consummation of such corporate event.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Company Optional Redemption</i>.
At any time we shall have the right to redeem in cash all, but not less than all, the shares of Series A Preferred Stock then outstanding
at a 20% redemption premium to the greater of (x) the amount of shares being redeemed, and (y) the equity value of the Common Stock underlying
the Series A Preferred Stock. The equity value of the Common Stock underlying the Series A Preferred Stock is calculated using the greatest
closing sale price of the Common Stock on any trading day immediately preceding the date we notify the holders of our election to redeem
and the date we make the entire payment required.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Fundamental Transactions</i>.
The Series A Certificate of Designations prohibit us from entering specified fundamental transactions (including, without limitation,
mergers, business combinations and similar transactions) unless we (or our successor) assumes in writing all of our obligations under
the Series A Certificate of Designations and the other Transaction Documents (as defined in the Series A Certificate of Designations).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Voting Rights</i>. The
holders of the Series A Preferred Stock shall have no voting power and no right to vote on any matter at any time, either as a separate
series or class or together with any other series or class of share of capital stock, and shall not be entitled to call a meeting of such
holders for any purpose nor shall they be entitled to participate in any meeting of the holders of Common Stock, except as provided in
the Series A Certificate of Designations (or as otherwise required by applicable law).</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Covenants</i>. The Series
A Certificate of Designations contains a variety of obligations on our part not to engage in specified activities, which are typical for
transactions of this type. In particular, we will not, and will cause our subsidiaries to not, redeem, repurchase or declare any dividend
or distribution on any of our capital stock (other than as required under the Series A Certificate of Designations). In addition, we will
not issue any preferred stock or issue any other securities that would cause a breach or default under the Series A Certificate of Designations
or Structuring Warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Reservation Requirements</i>.
So long as any Series A Preferred Stock remains outstanding, we shall at all times reserve at least 150% of the number of shares of Common
Stock as shall from time to time be necessary to effect the conversion of all Series A Preferred Stock then outstanding.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Series B Convertible Preferred Stock</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We designated 626 shares
of our authorized and unissued Preferred Stock as Series B Preferred Stock and established the rights, preferences and privileges of the
Series B Preferred Stock pursuant to the Series B Certificate of Designations filed with the Secretary of State of the State of Delaware,
as summarized below. Except as set forth below, the Series B Preferred Stock has terms and provisions that are identical to those of the
Series A Preferred Stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Ranking</i>. The Series
B Preferred Stock, with respect to the payment of dividends, distributions and payments upon the liquidation, dissolution and winding
up of us, ranks senior to all capital stock of us unless the Required Holders (as defined in the Series B Certificate of Designations)
or the requisite holders of the outstanding shares of the Series A Preferred Stock (the &#8220;Series A Requisite Holders&#8221;) consent
to the creation of other capital stock of us that is senior or equal in rank to the Series B Preferred Stock. The Series B Preferred Stock
ranks <i>pari passu</i> with the Series A Preferred Stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>


</div><!-- Field: Page; Sequence: 180; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->166<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Covenants</i>. The Series
B Certificate of Designations contains a variety of obligations on our part not to engage in specified activities, which are typical for
transactions of this type. In particular, we will not, and will cause our subsidiaries to not, redeem, repurchase or declare any dividend
or distribution on any of our capital stock (other than as required under the Series B Certificate of Designations). In addition, we will
not issue any preferred stock or issue any other securities that would cause a breach or default under the Series B Certificate of Designations.
Any waiver or amendment of the foregoing covenants by the Series A Requisite Holders shall be deemed to be a waiver or amendment by the
Required Holders (as defined in the Series B Certificate of Designations) under the Series B Certificate of Designations.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Series C Convertible Preferred Stock</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We designated 2,853 shares
of our authorized and unissued Preferred Stock as Series C Preferred Stock and established the rights, preferences and privileges of the
Series C Preferred Stock pursuant to the Series C Certificate of Designations filed with the Secretary of State of the State of Delaware,
as summarized below. Except as set forth below, the Series C Preferred Stock has terms and provisions that are substantially the same
as those of the Series A Preferred Stock and Series B Preferred Stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Ranking</i>. The Series
C Preferred Stock, with respect to the payment of dividends, distributions and payments upon the liquidation, dissolution and winding
up of us, ranks senior to all capital stock of us (including the Series A Preferred Stock and the Series B Preferred Stock) unless the
Required Holders (as defined in the Series C Certificate of Designations) consent to the creation of other capital stock of us that is
senior or equal in rank to the Series C Preferred Stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Conversion Rights</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Conversion at Option of
Holder</i>. Each holder of Series C&#160;Preferred Stock&#160;may convert all, or any part, of the outstanding Series C&#160;Preferred
Stock, at any time at such holder&#8217;s option, into shares of the Common Stock (which converted shares of Common Stock are referred
to as &#8220;Conversion Shares&#8221; herein) at the fixed &#8220;Conversion Price&#8221; of $0.224, which is subject to proportional
adjustment upon the occurrence of any stock split, stock dividend, stock combination and/or similar transactions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Alternate Conversion Upon
a Triggering Event</i>. Following the occurrence and during the continuance of a Triggering Event (as defined below), each holder may
alternatively elect to convert the Series C&#160;Preferred Stock&#160;at the &#8220;Alternate Conversion Price&#8221; equal to the lesser
of:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the Conversion Price, and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the greater of:</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the floor price of $0.0196; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in; text-align: justify">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">80% of the volume weighted average price of the Common Stock during the 5 consecutive trading days immediately prior to such conversion.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Certificate of Designations
contains standard and customary triggering events (each, a &#8220;Series C Triggering Event&#8221;), including but not limited to: (i)
the suspension from trading or the failure to list the Common Stock within certain time periods; (ii) failure to declare or pay any dividend
when due; (iii) the failure to timely file or make effective a registration statement on Form S-1 pursuant to the Registration Rights
Agreement, dated as of September 25, 2024, by and between the Company and the holders of Series A Preferred Stock party thereto (the &#8220;Second
Registration Rights Agreement&#8221;), (iv) our failure to cure a conversion failure of failure to deliver shares of the Common Stock
under the Series C Warrants, or notice of our intention not to comply with a request for conversion of any Series C&#160;Preferred Stock&#160;or
a request for exercise of any Series C Warrants, and (iv) bankruptcy or insolvency of us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->167<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If at the time of a conversion
the Alternate Conversion Price is determined to be the Floor Price because such Floor Price is greater than 80% of the five-day volume
weighted average price of a share of Common Stock, then the Conversion Amount (as defined in the Certificates of Designations), shall
automatically increase such that the shares of Series C Preferred Stock issuable upon such conversion are equal to the number of shares
of Common Stock that would have been issuable if the Alternate Conversion Price had been equal to 80% of the volume weighted average price
of the Common Stock during the five consecutive trading days immediately prior to such conversion.&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Other Adjustments</i>.
In connection with the Private Placement, we have agreed to seek stockholder approval at a special meeting of stockholders to be held
not later than December 15, 2024 of the issuance of Conversion Shares at a conversion price below the Conversion Price (the date of such
approval, the &#8220;Second Stockholder Approval Date&#8221;). If, on or after the Stockholder Approval Date, we issue any shares of Common
Stock for a consideration per share (the &#8220;New Issuance Price&#8221;) less than a price equal to the Conversion Price in effect immediately
prior to such issuance, the Conversion Price shall be reduced to the New Issuance Price.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If 30 days or 60 days following
the occurrence of the later of (x) the Second Stockholder Approval Date and (y) the earlier of (a) the effective date of the registration
statement to be filed pursuant to the Second Registration Rights Agreement and (b) the date that the Series C&#160;Preferred Stock&#160;is
eligible to be resold without restriction under&#160;Rule 144&#160;of the&#160;Securities Act, the Conversion Price then in effect is
greater than the greater of $0.0196 and the Market Price (as defined in the Series C Certificate of Designations) then in effect (the
&#8220;Series C Adjustment Price&#8221;), the Conversion Price shall automatically lower to the Series C Adjustment Price.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Covenants</i>. The Series
C Certificate of Designations contains a variety of obligations on our part not to engage in specified activities, which are typical for
transactions of this type. In particular, we will not, and will cause our subsidiaries to not, redeem, repurchase or declare any dividend
or distribution on any of our capital stock (other than as required under the Series C Certificate of Designations) and will not incur
any indebtedness other than ordinary course trade payables or, subject to certain exceptions, incur any liens. In addition, we will not
issue any preferred stock or issue any other securities that would cause a breach or default under the Series C Certificate of Designations.
Any waiver or amendment of the foregoing covenants by the Required Holders (as defined in the Series C Certificate of Designations) shall
be deemed to be a waiver or amendment by the Required Holders (as defined in the Series C Certificate of Designations) under the Series
C Certificate of Designations or Series C Warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Reservation Requirements</i>.
So long as any Series C&#160;Preferred Stock&#160;remains outstanding, we shall at all times reserve at least 250% of the number of shares
of Common Stock as shall from time to time be necessary to effect the conversion of all Series C&#160;Preferred Stock&#160;then outstanding.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Common Stock</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Voting</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Each holder of Common Stock
is entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of directors, with
the exception of certain matters relating solely to the terms of one or more outstanding series of preferred stock. Under the Charter,
our stockholders do not have cumulative voting rights. Because of this, the holders of a majority of the shares of Common Stock entitled
to vote in any election of directors can elect all of the directors standing for election.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Dividends</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Subject to preferences that
may apply to any then-outstanding Preferred Stock, the holders of Common Stock are entitled to receive ratably those dividends, if any,
as may be declared from time to time by the Board out of legally available funds.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Liquidation</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In the event of our liquidation,
dissolution or winding up, holders of Common Stock will be entitled to share ratably in the net assets legally available for distribution
to stockholders after the payment of all of our debts and other liabilities and the satisfaction of any liquidation preference granted
to the holders of any then-outstanding shares of Preferred Stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Preemptive or Similar Rights</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Holders of Common Stock have
no preemptive, conversion or subscription rights and there are no redemption or sinking fund provisions applicable to the Common Stock.
The rights, preferences and privileges of the holders of Common Stock are subject to, and may be adversely affected by, the rights of
the holders of shares of any series of Preferred Stock that we may designate in the future.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Warrants</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The outstanding warrants
consist of (i) Public Warrants, (ii) Private Placement Warrants, (iii) warrants initially issued by CERo Therapeutics, Inc. and converted
into warrants to purchase Common Stock in connection with our initial business combination (the &#8220;Conversion Warrants&#8221;), (iv)
the Series A Warrants, (v) the Series C Warrants and (vi) the Preferred Warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Public Warrants</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>General</i>. Each Public
Warrant entitles the registered holder to purchase one share of Common Stock at a price of $11.50 per share, subject to adjustment as
discussed below, commencing 30 days after the completion of the initial business combination. The Public Warrants are governed by the
terms of a Warrant Agreement, dated as of October 5, 2021 between us and Continental Stock Transfer &amp; Trust Company, as warrant agent
(the &#8220;Warrant Agreement&#8221;). Pursuant to the Warrant Agreement, a warrant holder may exercise its Public Warrants only for a
whole number of shares of Common Stock. This means that only a whole Public Warrant may be exercised at any given time by a warrant holder.
No fractional Public Warrants will be issued and only whole Public Warrants will trade. The Public Warrants will expire five years after
the completion of the initial business combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Registration of Public
Warrants.</i> We will not be obligated to deliver any shares of Common Stock pursuant to the exercise for cash of a Public Warrant and
will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares
of Common Stock underlying the Public Warrants is then effective and a prospectus relating thereto is current, subject to our satisfying
our obligations described below with respect to registration. No Public Warrant will be exercisable and we will not be obligated to issue
shares of Common Stock upon exercise of a Public Warrant unless Common Stock issuable upon such warrant exercise has been registered,
qualified or deemed to be exempt from the registration or qualifications requirements of the securities laws of the state of residence
of the registered holder of the Public Warrants. Notwithstanding the foregoing, if a registration statement covering the shares of Common
Stock issuable upon exercise of the Public Warrants has not been declared effective by the end of 60 business days following the closing
of the initial business combination, warrantholders may, until such time as there is an effective registration statement and during any
period when we shall have failed to maintain an effective registration statement, exercise Public Warrants on a cashless basis pursuant
to the exemption provided by Section 3(a)(9) of the Securities Act.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We have agreed that as soon
as practicable, but in no event later than 20 business days after the closing of the initial business combination, we will use our best
efforts to file with the SEC, and within 60 business days following the initial business combination to have declared effective, a registration
statement covering the issuance of the shares of Common Stock issuable upon exercise of the Public Warrants and to maintain a current
prospectus relating to those shares of Common Stock until the Public Warrants expire or are redeemed, as specified in the Warrant Agreement.
If a registration statement covering the shares of Common Stock issuable upon exercise of the Public Warrants is not effective by the
60<sup>th</sup> business day after the closing of the initial business combination, warrantholders may, until such time as there is an
effective registration statement and during any period when we will have failed to maintain an effective registration statement, exercise
Public Warrants on a &#8220;cashless basis&#8221; in accordance with Section 3(a)(9) of the Securities Act or another exemption. In addition
to the above, if Common Stock is at the time of any exercise of a Public Warrant not listed on a national securities exchange such that
it satisfies the definition of a &#8220;covered security&#8221; under Section 18(b)(1) of the Securities Act, we may, at our option, require
holders of Public Warrants who exercise their Public Warrants to do so on a &#8220;cashless basis&#8221; in accordance with Section 3(a)(9)
of the Securities Act and, in the event we so elects, we will not be required to file or maintain in effect a registration statement,
and in the event it does not so elect, it will use our best efforts to register or qualify the shares under applicable blue sky laws to
the extent an exemption is not available.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;&#160;</p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Redemption of Warrants.</i>
Once the Public Warrants become exercisable, we may call the Public Warrants for redemption:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">in whole and not in part;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">at a price of $0.01 per warrant;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">upon not less than 30 days&#8217; prior written notice of redemption (the &#8220;30-day redemption period&#8221;) to each warrant holder; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">if an only if, the reported last sale price of Common Stock (or the closing bid price of our common stock in the event shares of Common Stock are not traded on any specific day) equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalization and the like) for any 20 trading days within a 30 day trading period ending three business days before we send the notice of redemption to the warrantholders.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If and when the Public Warrants
become redeemable by us, it may exercise its redemption right even if it is unable to register or qualify the underlying securities for
sale under all applicable state securities laws.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We have established the last
of the redemption criterion discussed above to prevent a redemption call unless there is at the time of the call a significant premium
to the warrant exercise price. If the foregoing conditions are satisfied and we issue a notice of redemption of the Public Warrants, each
warrant holder will be entitled to exercise its warrant prior to the scheduled redemption date. However, the price of the Common Stock
may fall below the $18.00 redemption trigger price (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations
and the like) as well as the $11.50 (for whole shares) warrant exercise price after the redemption notice is issued.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Cashless Exercise.</i>
If we call the Public Warrants for redemption as described above, our management will have the option to require any holder that wishes
to exercise its Public Warrant to do so on a &#8220;cashless basis.&#8221; In determining whether to require all holders to exercise their
Public Warrants on a &#8220;cashless basis,&#8221; Our management will consider, among other factors, our cash position, the number of
Public Warrants that are outstanding and the dilutive effect on our stockholders of issuing the maximum number of shares of Common Stock
issuable upon the exercise of our warrants. If our management takes advantage of this option, all holders of Public Warrants would pay
the exercise price by surrendering their warrants for that number of shares of Common Stock equal to the quotient obtained by dividing
(x) the product of the number of shares of Common Stock underlying the Public Warrants, multiplied by the difference between the exercise
price of the Public Warrants and the &#8220;fair market value&#8221; (defined below) by (y) the fair market value. The &#8220;fair market
value&#8221; shall mean the average reported last sale price of the Common Stock for the 10 trading days ending on the third trading day
prior to the date on which the notice of redemption is sent to the holders of Public Warrants. If our management takes advantage of this
option, the notice of redemption will contain the information necessary to calculate the number of shares of Common Stock to be received
upon exercise of the Public Warrants, including the &#8220;fair market value&#8221; in such case. Requiring a cashless exercise in this
manner will reduce the number of shares to be issued and thereby lessen the dilutive effect of a warrant redemption.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">A holder of a Public Warrant
may notify us in writing in the event it elects to be subject to a requirement that such holder will not have the right to exercise such
warrant, to the extent that after giving effect to such exercise, such person (together with such person&#8217;s affiliates), to the warrant
agent&#8217;s actual knowledge, would beneficially own in excess 9.8% (or such other amount as a holder may specify) of the shares of
Common Stock outstanding immediately after giving effect to such exercise.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Anti-Dilution Adjustments.</i>
If the number of outstanding shares of Common Stock is increased by a stock dividend payable in shares of Common Stock, or by a split-up
of shares of Common Stock or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the number
of shares of Common Stock issuable on exercise of each warrant will be increased in proportion to such increase in the outstanding shares
of Common Stock. A rights offering to holders of Common Stock entitling holders to purchase shares of Common Stock at a price less than
the fair market value will be deemed a stock dividend of a number of shares of Common Stock equal to the product of (i) the number of
shares of Common Stock actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering
that are convertible into or exercisable for Common Stock) multiplied by (ii) one (1) minus the quotient of (x) the price per share of
Common Stock paid in such rights offering divided by (y) the fair market value. For these purposes (i) if the rights offering is for securities
convertible into or exercisable for Common Stock, in determining the price payable for Common Stock, there will be taken into account
any consideration received for such rights, as well as any additional amount payable upon exercise or conversion and (ii) fair market
value means the volume weighted average price of Common Stock as reported during the 10 trading day period ending on the trading day prior
to the first date on which the shares of Common Stock trade on the applicable exchange or in the applicable market, regular way, without
the right to receive such rights.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, if we, at any
time while the Public Warrants are outstanding and unexpired, pay a dividend or makes a distribution in cash, securities or other assets
to the holders of Common Stock on account of such shares of Common Stock (or other shares of our capital stock into which the Public Warrants
are convertible), other than (a) as described above or (b) any cash dividends or cash distributions which, when combined on a per share
basis with all other cash dividends and cash distributions paid on the shares of Common Stock during the 365-day period ending on the
date of declaration of such dividend or distribution does not exceed $0.50 (as adjusted to appropriately reflect any other adjustments
and excluding cash dividends or cash distributions that resulted in an adjustment to the exercise price or to the number of shares of
Common Stock issuable on exercise of each warrant) but only with respect to the amount of the aggregate cash dividends or cash distributions
equal to or less than $0.50 per share.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">If the number of outstanding
shares of Common Stock is decreased by a consolidation, combination, reverse stock split or reclassification of shares of Common Stock
or other similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar
event, the number of shares of Common Stock issuable on exercise of each Public Warrant will be decreased in proportion to such decrease
in outstanding shares of Common Stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Whenever the number of shares
of Common Stock purchasable upon the exercise of the Public Warrants is adjusted, as described above, the warrant exercise price will
be adjusted by multiplying the warrant exercise price immediately prior to such adjustment b a fraction (x) the numerator of which will
be the number of shares of Common Stock purchasable upon the exercise of the Public Warrants immediately prior to such adjustment, and
(y) the denominator of which will be the number of shares of Common Stock to purchase immediately thereafter.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In case of any reclassification
or reorganization of the issued and outstanding shares of Common Stock (other than those described above or that solely affects the par
value of such shares of Common Stock), or in the case of any merger or consolidation of us with or into another entity (other than a consolidation
or merger in which we are the continuing corporation and that does not result in any reclassification or reorganization of our issued
and outstanding shares of Common Stock) in which any &#8220;person&#8221; or &#8220;group&#8221; (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act) acquired more than 50% of the voting power of our securities in a transaction that results in a Change
of Control Transaction (as defined in the Warrant Agreement), or in the case of any sale or conveyance to another corporation or entity
of the assets or other property of us as an entirety or substantially as an entirety, the holders of Public Warrants will thereafter have
the right to purchase and receive, upon the basis and upon the terms and conditions specified in the Public Warrants and in lieu of shares
of Common Stock immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount
of shares of Common Stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger
or consolidation, or upon a dissolution following any such sale or transfer, that the holder of the Public Warrants would have received
if such holder had exercised their Public Warrants immediately prior to such event. However, if such holders were entitled to exercise
a right of election as to the kind or amount of securities, cash or other assets receivable upon such consolidation or merger, then the
kind and amount of securities, cash or other assets for which each Public Warrant will become exercisable will be deemed to be the weighted
average of the kind and amount received per share by such holders in such consolidation or merger that affirmatively make such election.
If less than 70% of the consideration receivable by the holders of Common Stock in such a transaction is payable in the form of Common
Stock in the successor entity that is listed for trading on a national securities exchange or is quoted in an established over-the-counter
market, or is to be so listed for trading or quoted immediately following such event, and if the registered holder of the Public Warrant
properly exercises the Public Warrant within thirty days following public disclosure of such transaction pursuant to a Current Report
on Form 8-K, the warrant exercise price will be reduced as specified in the Warrant Agreement based on the Black-Scholes value (as defined
in the Warrant Agreement) of the Public Warrant. The purpose of such exercise price reduction is to provide additional value to holders
of the Public Warrants when an extraordinary transaction occurs during the exercise period of the Public Warrants pursuant to which the
holders of the Public Warrants otherwise do not receive the full potential value of the Public Warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->171<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Public Warrant may be
exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise
form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price
(or on a cashless basis, if applicable), by certified or official bank check payable to us, for the number of Public Warrants being exercised.
The warrant holders do not have the rights or privileges of holders of Common Stock and any voting rights until they exercise their Public
Warrants and receive shares of Common Stock. After the issuance of shares of Common Stock upon exercise of the Public Warrants, each holder
will be entitled to one vote for each share held of record on all matters to be voted on by stockholders.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Public Warrants may be exercised
only for a whole number of shares of Common Stock. No fractional shares will be issued upon exercise of the Public Warrants. If, upon
exercise of the Public Warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round
down to the nearest whole number of shares of Common Stock to be issued to the warrant holder. As a result, warrant holders not purchasing
an even number of Public Warrants must sell any odd number of Public Warrants in order to obtain full value from the fractional interest
that will not be issued.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Public Warrants were
issued in registered form under the Warrant Agreement. You should review a copy of the Warrant Agreement, which is filed as an exhibit
to our registration statement on Form S-4 filed on June 7, 2023, for a complete description of the terms and conditions applicable to
the Public Warrants. The Warrant Agreement provides that the terms of the Public Warrants may be amended without the consent of any holder
to cure any ambiguity or correct any defective provision, but requires the approval by the holders of a majority of the then-outstanding
Public Warrants to make any changes that adversely affect the interests of the registered holders of Public Warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Private Placement Warrants</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Private Placement Warrants
(including the Common Stock issuable upon exercise of the Private Placement Warrants) are not transferable, assignable or salable until
30 days after the completion of our business combination (subject to limited exceptions). In addition, for as long as Private Placement
Warrants are held by Cantor and/or its designees or affiliates, such Private Placement Warrants will be subject to a lock-up in compliance
with FINRA Rule 5110(e) and may not be exercised after five years from the commencement of sales of our Initial Public Offering in accordance
with FINRA Rule 5110(g)(8)(A). The Private Placement Warrants will be redeemable by us and exercisable by the holders on the same basis
as the Public Warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Conversion Warrants</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Exercise Price</i>. The
Conversion Warrants are initially exercisable for cash at an exercise price equal to $10.00. The exercise price is subject to adjustment
for stock splits, combinations and similar events, and, in the event of stock dividends and splits, the number of shares of Common Stock
issuable upon the exercise of the Conversion Warrant will also be adjusted so that the aggregate exercise price shall be the same immediately
before and immediately after any such adjustment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Exercise Period</i>. The
Conversion Warrants will expire five years after their issuance, or November 14, 2024.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Automatic Conversion</i>.
The Conversion Warrants will automatically convert at the end of the exercise period if the fair market value (as determined in the Conversion
Warrants) of a share of Common Stock underlying the Conversion Warrants is greater than the exercise price in effect on such date.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Common Warrants</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Series A Warrants</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Exercise Price</i>. The
Series A Warrants were initially exercisable for cash at an exercise price equal to the greater of (x) $9.20 (as adjusted for stock splits,
stock dividends, stock combinations, recapitalizations and similar events) and (y) the closing price of the Common Stock on the trading
day immediately prior to the Subscription Date (as defined in the Series A Warrant). As of the date of this prospectus, the current exercise
price of the Series A Warrants is $1.39. The exercise price is subject to adjustment for stock splits, combinations and similar events,
and, in the event of stock dividends and splits, the number of shares of Common Stock issuable upon the exercise of the Series A Warrant
will also be adjusted so that the aggregate exercise price shall be the same immediately before and immediately after any such adjustment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>April Exercise Price Adjustment.</i>
The Series A Warrants were subject to an adjustment whereby, if the exercise price in effect as of the First Stockholder Approval Date
was greater than the lesser of (i) the closing price of the Common Stock immediately prior to such date and (ii) the quotient of (x) the
sum of each closing price of the Common Stock during the five trading day period ending, and including the trading day immediately prior
to the First Stockholder Approval Date, divided by (y) five, the Exercise Price shall automatically lower to such price as of the First
Stockholder Approval Date. As a result, in April 2024, the exercise price of the Series A Warrants was lowered to $1.39.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Exercise Period</i>. The
Series A Warrants became exercisable beginning six months after the consummation of the issuance date (the &#8220;Initial Exercisability
Date&#8221;) and expire on the third anniversary of the Initial Exercisability Date. The Series A Warrants require &#8220;buy-in&#8221;
payments to be made by us for failure to deliver any shares of Common Stock issuable upon exercise.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Cashless Exercise</i>.
If at the time of exercise of the Series A Warrants, there is no effective registration statement registering the shares of the Common
Stock underlying the Series A Warrants, such warrants may be exercised on a cashless basis pursuant to their terms.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Purchase Rights; Participation
Rights</i>. If we issue options, convertible securities, warrants, shares, or similar securities to holders of Common Stock, each holder
of Series A Warrants has the right to acquire the same as if the holder had exercised its Series A Warrant. The holders of Series A Warrants
are entitled to receive any dividends paid or distributions made to our holders of Common Stock on an &#8220;as if converted&#8221; basis.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Fundamental Transactions</i>.
The Series A Warrants prohibit us from entering into specified fundamental transactions unless the successor entity assumes all of our
obligations under the Series A Warrants under a written agreement before the transaction is completed. Upon specified corporate events,
a holder of Series A Warrants will thereafter have the right to receive upon an exercise such shares, securities, cash, assets or any
other property whatsoever which the holder would have been entitled to receive upon the happening of the applicable corporate event had
the Series A Warrant been exercised immediately prior to the applicable corporate event. When there is a transaction involving specified
changes of control, a holder of Series A Warrants can request the Company to exchange the then unexercised portion of their Series A Warrants for consideration equal to the Black-Scholes
value thereof, which shall be settled, at the option of the Company in either (i) the form of rights convertible into the consideration
receivable by holders of the underlying shares of common stock, based upon the value of the shares of the successor entity over a specified
period or (ii) cash in an amount equal to the Black-Scholes value.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Series C Warrants</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Except as set forth below,
the Series C Warrants have terms and provisions that are substantially the same as those of the Series A Warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Exercise Price</i>. The
Series C Warrants will initially be exercisable for cash at an exercise price equal to $0.098. The exercise price is subject to adjustment
for stock splits, combinations and similar events, and, in the event of stock dividends and splits, the number of shares of Common Stock
issuable upon the exercise of the Series C Warrant will also be adjusted so that the aggregate exercise price shall be the same immediately
before and immediately after any such adjustment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Preferred Warrants</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Exercise Price</i>. The
Preferred Warrants will initially be exercisable for cash at an exercise price equal to $1,000 per share. The exercise price is subject
to adjustment for stock splits, combinations and similar events, and, in the event of stock dividends and splits, the number of shares
of Series A Preferred Stock issuable upon the exercise of the Preferred Warrant will also be adjusted so that the aggregate exercise price
shall be the same immediately before and immediately after any such adjustment.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Exercise Period</i>. The
Preferred Warrants will expire on the first anniversary of the closing of the initial business combination, or February 14, 2025.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Forced Exercise</i>. We
have the right to require the holders of Preferred Warrants to exercise such Preferred Warrants into up to an aggregate number of shares
of Preferred Stock equal to the holder&#8217;s pro rata amount of 2,000 Preferred Shares.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><i>Fundamental Transactions</i>.
The Preferred Warrants prohibit us from entering into specified fundamental transactions unless the successor entity assumes all of our
obligations under the Preferred Warrants under a written agreement before the transaction is completed. Upon specified corporate events,
a holder of Preferred Warrants will thereafter have the right to receive upon an exercise such shares, securities, cash, assets or any
other property whatsoever which the holder would have been entitled to receive upon the happening of the applicable corporate event had
the Preferred Warrant been exercised immediately prior to the applicable corporate event.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Anti-Takeover Provisions</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Section 203 of the Delaware General Corporation
Law</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We are subject to Section
203 of the DGCL, which generally prohibits a publicly held Delaware corporation from engaging in any business combination with any interested
stockholder for a period of three years after the date that such stockholder became an interested stockholder, with the following exceptions:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">before such date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction began, excluding for purposes of determining the voting stock outstanding, but not the outstanding voting stock owned by the interested stockholder, those shares owned (1) by persons who are directors and also officers and (2) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">on or after such date, the business combination is approved by the board of directors and authorized at an annual or special meeting of the stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">In general, Section 203 defines a &#8220;business
combination&#8221; to include the following:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 24pt; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">any merger or consolidation involving the corporation and the interested stockholder;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">any transaction involving the corporation that has the effect of increasing the proportionate share of the stock or any class or series of the corporation beneficially owned by the interested stockholder; or</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 188; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->174<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits by or through the corporation.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">in general, Section 203 defines an &#8220;interested stockholder&#8221; as an entity or person who, together with the person&#8217;s affiliates and associates, beneficially owns or, within three years prior to the time of determination of interested stockholder status, did own 15% or more of the outstanding voting stock of the corporation.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">a Delaware corporation may &#8220;opt out&#8221; of these provisions with an express provision in its original certificate of incorporation or an express provision in its amended and restated certificate of incorporation or amended and restated bylaws resulting from a stockholders&#8217; amendment approved by at least a majority of the outstanding voting shares. We have not opted out of these provisions. As a result, mergers or other takeover or change in control attempts of we may be discouraged or prevented.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In general, Section 203 defines
an &#8220;interested stockholder&#8221; as an entity or person who, together with the person&#8217;s affiliates and associates, beneficially
owns or, within three years prior to the time of determination of interested stockholder status, did own 15% or more of the outstanding
voting stock of the corporation.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">A Delaware corporation may
&#8220;opt out&#8221; of these provisions with an express provision in its original certificate of incorporation or an express provision
in its amended and restated certificate of incorporation or amended and restated bylaws resulting from a stockholders&#8217; amendment
approved by at least a majority of the outstanding voting shares. We have not opted out of these provisions. As a result, mergers or other
takeover or change in control attempts of us may be discouraged or prevented.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Among other things, the Charter
and Bylaws:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 48pt; text-align: justify; text-indent: -24pt">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">permit the Board to issue up to 10,000,000 shares of Preferred Stock, with any rights, preferences and privileges as they may designate, including the right to approve an acquisition or other change of control;</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">provide that our stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide advance notice in writing, and also specify requirements as to the form and content of a stockholder&#8217;s notice;</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
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    <td>&#160;</td>
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    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The amendment of a number
of these provisions would require approval by the holders of at least 66 2/3% of the voting power of all of our then-outstanding capital
stock entitled to vote generally in the election of directors, voting together as a single class.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The combination of these
provisions will make it more difficult for our existing stockholders to replace the Board, as well as for another party to obtain control
of us by replacing the Board. Since the Board has the power to retain and discharge our officers, these provisions could also make it
more difficult for existing stockholders or another party to effect a change in management. In addition, the authorization of undesignated
preferred stock makes it possible for the Board to issue preferred stock with voting or other rights or preferences that could impede
the success of any attempt to change our control.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">These provisions are intended
to enhance the likelihood of continued stability in the composition of our Board and our policies and to discourage coercive takeover
practices and inadequate takeover bids. These provisions are also designed to reduce our vulnerability to hostile takeovers and to discourage
certain tactics that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender
offers for our shares and may have the effect of delaying changes in our control or management. As a consequence, these provisions may
also inhibit fluctuations in the market price of our stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Choice of Forum</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The Charter and Bylaws provide
that, unless we consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the
Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state court located within the State of Delaware or,
if all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware) and any appellate
court therefrom will be the sole and exclusive forum for the following claims or causes of action under Delaware statutory or common law:
(A) any derivative claim or cause of action brought on our behalf, (B) any claim or cause of action for breach of a fiduciary duty owed
by any of our then current or former directors, officers, or other employees to us or our stockholders, (C) any claim or cause of action
against it or any of our current or former directors, officers or other employees arising out of or pursuant to any provision of the DGCL,
the Charter or the Bylaws (as each may be amended from time to time), (D) any claim or cause of action seeking to interpret, apply, enforce
or determine the validity of the Charter or Bylaws (as each may be amended from time to time, including any right, obligation, or remedy
thereunder) (E) any claim or cause of action as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware
or (F) any claim or cause of action against us or any of our then current or former directors, officers or other employees, governed by
the internal-affairs doctrine or otherwise related to our internal affairs, in each case to the fullest extent permitted by law and subject
to the court having personal jurisdiction over the indispensable parties named as defendants. These provisions do not apply to claims
or causes of action brought to enforce a liability or duty created by the Securities Act, the Exchange Act or any other claim where the
U.S. federal courts have exclusive jurisdiction. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal
and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such
claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different
courts, among other considerations, the Charter and Bylaws will further provide that, unless we consent in writing to the selection of
an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States will be the exclusive forum
for the resolution of any action or proceeding asserting a cause of action arising under the Securities Act, including all causes of action
asserted against any defendant named in such complaint. For the avoidance of doubt, this provision is intended to benefit and may be enforced
by our officers and directors, the underwriters engaged in respect to any offering giving rise to such complaint giving rise to such complaint,
any other professional entity whose profession gives authority to a statement made by that person or entity and who has prepared or certified
any part of the documents underlying the Business Combination. While the Delaware courts have determined that such choice of forum provisions
are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum
provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of
the Charter and Bylaws.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">These exclusive forum provisions
may limit a stockholder&#8217;s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors,
officers, or other employees and may discourage these types of lawsuits, or could result in increased costs for a stockholder to bring
a claim, particularly if they do not reside in or near Delaware, both of which may discourage lawsuits against us or our directors, officers
and employees.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Furthermore, the enforceability
of similar choice of forum provisions in other companies&#8217; certificates of incorporation or bylaws has been challenged in legal proceedings,
and it is possible that a court could find these types of provisions to be inapplicable or unenforceable.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Exchange Listing</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Our Common Stock and Public
Warrants are listed on the Nasdaq Capital Market under the symbol &#8220;CERO&#8221; and &#8220;CEROW,&#8221; respectively.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Transfer Agent and Registrar</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The transfer agent and registrar
for our securities is Continental Stock Transfer &amp; Trust Company. The transfer agent and registrar&#8217;s address is One State Street
Plaza, 30<sup>th</sup> Floor, New York, New York 10004, and its telephone number is (800) 509-5586.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-variant: small-caps"><b>&#160;</b></span></p><div>


</div><!-- Field: Page; Sequence: 191; Value: 1 --><div>
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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="text-align: center; font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt">&#160;</p><div>

</div><div><a id="a_023"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>DESCRIPTION OF SECURITIES WE ARE OFFERING</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are offering up to [____] shares of our Common
Stock or Pre-Funded Warrants to purchase up to [_____] shares of our Common Stock together with Offered Common Warrants to purchase up
to [_____] shares of Common Stock. For each Pre-Funded Warrant we sell, the number of shares of Common Stock we are offering will be decreased
on a one-for-one basis. Each share of Common Stock or Pre-Funded Warrant is being sold together with an Offered Common Warrant to purchase
one share of Common Stock. The shares of Common Stock or Pre-Funded Warrants and accompanying Offered Common Warrants will be issued separately
and will be immediately separable upon issuance but must be purchased together in this offering. We are also registering the shares of
Common Stock issuable from time to time upon exercise of the Offered Common Warrants and Pre-Funded Warrants offered hereby.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Common Stock</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The material terms and provisions of our Common
Stock are described under the caption &#8220;Description of Securities&#8221; in this prospectus and are incorporated herein by reference.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Pre-Funded Warrants</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following summary of certain terms and provisions
of the Pre-Funded Warrants that are being offered hereby is not complete and is subject to, and qualified in its entirety by, the provisions
of the Pre-Funded Warrant, the form of which is filed as an exhibit to the registration statement of which this prospectus forms a part.
Prospective investors should carefully review the terms and provisions of the form of Pre-Funded Warrant for a complete description of
the terms and conditions of the Pre-Funded Warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Duration and Exercise Price</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Each Pre-Funded Warrant offered hereby will have
an initial exercise price per share equal to $0.001. The Pre-Funded Warrants will be immediately exercisable and may be exercised at any
time until the Pre-Funded Warrants are exercised in full. The exercise price and number of shares of Common Stock issuable upon exercise
is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting our Common
Stock and the exercise price.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Exercisability</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Each Pre-Funded Warrant may be exercised at any
time following the date of issuance and from time to time thereafter until the Pre-Funded Warrants are exercised in full. The Pre-Funded
Warrants will be exercisable in whole or in part by delivering to the Company a completed instruction form for exercise and complying
with the requirements for exercise set forth in the Pre-Funded Warrant. Payment of the exercise price may be made in cash in which case
the holder would receive upon such exercise the net number of shares of Common Stock determined according to the formula set forth in
the Pre-Funded Warrant.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Exercise Limitation</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In general, a holder will not have the right to
exercise any portion of a Pre-Funded Warrant if the holder (together with its Attribution Parties (as defined in the Pre-Funded Warrant))
would beneficially own in excess of 4.99% or 9.99%, at the election of the holder, of the number of shares of our Common Stock outstanding
immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Pre-Funded
Warrant. However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99% upon notice to us,
provided, that any increase in this limitation will not be effective until 61 days after such notice from the holder to us and such increase
or decrease will apply only to the holder providing such notice.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Transferability</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Subject to applicable laws, a Pre-Funded Warrant
may be transferred at the option of the holder upon surrender of the Pre-Funded Warrant to us together with the appropriate instruments
of transfer.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 192; Value: 1 --><div>
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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Fractional Shares</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">No fractional shares of Common Stock will be issued
upon the exercise of the Pre-Funded Warrants. Rather, the number of shares of Common Stock to be issued will, at our election, either
be rounded up to the nearest whole number or we will pay a cash adjustment in respect of such final fraction in an amount equal to such
fraction multiplied by the exercise price.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Trading Market</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There is no trading market available for the Pre-Funded
Warrants on any securities exchange or nationally recognized trading system.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Fundamental Transactions</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If a &#8220;Fundamental Transaction&#8221; occurs
while the Pre-Funded Warrants are outstanding (which includes, but is not limited to, merger transactions or a sale of substantially all
of the company&#8217;s assets), then if holders of the Common Stock are given any choice as to the securities, cash or property to be
received in a Fundamental Transaction (as defined in the Pre-Funded Warrant), then the holder will be given the same choice as to the
consideration it receives upon any exercise of either the Pre-Funded Warrants following such Fundamental Transaction.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Right as a Stockholder</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Except as otherwise provided in the Pre-Funded
Warrants or by virtue of such holder&#8217;s ownership of shares of our Common Stock, the holders of the Pre-Funded Warrants do not have
the rights or privileges of holders of our Common Stock, including any voting rights, until they exercise their Pre-Funded Warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Offered Common Warrants</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following summary of certain terms and provisions
of the Offered Common Warrants that are being offered hereby is not complete and is subject to, and qualified in its entirety by, the
provisions of the Offered Common Warrant, the form of which is filed as an exhibit to the registration statement of which this prospectus
forms a part. Prospective investors should carefully review the terms and provisions of the form of Offered Common Warrant for a complete
description of the terms and conditions of the Offered Common Warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We are offering Offered Common Warrants to purchase
up to an aggregate of [______] shares of our Common Stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Each Offered Common Warrant issued in this offering
represents the right to purchase one share of Common Stock at an initial exercise price of $[__] per share. Each Offered Common Warrant
may be exercised at the election of the holder immediately upon issuance and from time to time thereafter through and including the fifth
anniversary of the initial exercise date.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Offered Common Warrants will be exercisable
in whole or in part by delivering to the Company a completed instruction form for exercise and complying with the requirements for exercise
set forth in the Offered Common Warrant. Payment of the exercise price may be made in cash, in which case the holder would receive upon
such exercise the net number of shares of Common Stock determined according to the formula set forth in the Offered Common Warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>No Fractional Shares</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of the Offered Common Warrants. As to any fraction of a share which the holder would otherwise
be entitled to purchase upon such exercise, the number of shares of Common Stock to be issued shall be rounded up to the nearest whole
number.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 193; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->179<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Exercise Limitation</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In general, a holder will not have the right to
exercise any portion of an Offered Common Warrant if the holder (together with its Attribution Parties (as defined in the Offered Common
Warrant)) would beneficially own in excess of 4.99% or 9.99%, at the election of the holder, of the number of shares of our Common Stock
outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of
the Offered Common Warrant. However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99%
upon notice to us, provided that any increase in this limitation will not be effective until 61 days after such notice from the holder
to us and such increase or decrease will apply only to the holder providing such notice.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Adjustment for Stock Splits</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The exercise price and the number of shares of
Common Stock purchasable upon the exercise of the Offered Common Warrants are subject to adjustment upon the occurrence of specific events,
including sales of additional shares of Common Stock, stock dividends, stock splits, and combinations of our Common Stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Dividends or Distributions</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If we declare or make any dividend or other distribution
of our assets (or rights to acquire its assets) to holders of shares of our Common Stock, by way of return of capital or otherwise (including,
without limitation, any distribution of cash, stock or other securities, property, options, evidence of indebtedness or any other assets
by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) at any
time after the issuance of the Offered Common Warrants, then, in each such case, the holders of the Offered Common Warrants shall be entitled
to participate in such distribution to the same extent that the holders would have participated therein if the holders had held the number
of shares of Common Stock acquirable upon complete exercise of the Offered Common Warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Purchase Rights</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If we grant, issue or sell any shares of our Common
Stock or securities exercisable for, exchangeable for or convertible into our Common Stock, or rights to purchase stock, common warrants,
securities or other property pro rata to the record holders of any class of shares of our Common Stock, referred to as Purchase Rights,
then each holder of the Offered Common Warrants will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the holder could have acquired if the holder had held the number of shares of Common Stock acquirable upon complete
exercise of the Offered Common Warrants immediately before the record date, or, if no such record is taken, the date as of which the record
holders of shares of Common Stock are to be determined, for the grant, issue or sale of such Purchase Rights.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Fundamental Transactions</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In the event of a fundamental transaction, as
described in the Offered Common Warrants and generally including any reorganization, recapitalization or reclassification of our Common
Stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with
or into another person, the consummation of a business combination with another person or group of persons whereby such other person or
group acquires greater than 50.1% of the voting power of the outstanding Common Stock and preferred stock, the holders of the Offered
Common Warrants will be entitled to receive upon exercise of the Offered Common Warrants the kind and amount of securities, cash or other
property that the holders would have received had they exercised the Offered Common Warrants immediately prior to such fundamental transaction.
Notwithstanding anything to the contrary, in the event of a Fundamental Transaction, the holder may require the Company or its successor
to repurchase the Offered Common Warrants for its Black-Scholes Value (as defined in the Offered Common Warrants) in cash. This right
can be exercised concurrently with, or within 30 days following, the consummation or public announcement of the transaction. If the Fundamental
Transaction occurs outside the Company&#8217;s control, such as in a hostile takeover or an unapproved transaction, the holder is entitled
to receive consideration equivalent in type and proportion to that offered to common stockholders, also calculated based on the Black-Scholes
model. Additionally, if no consideration is offered to the Company&#8217;s stockholders in the transaction, the holder is deemed to receive
common stock of the successor entity, preserving the Offered Common Warrants value.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 194; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->180<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Transferability</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Subject to applicable laws, the Offered Common
Warrants may be offered for sale, sold, transferred or assigned. There is currently no trading market for the Offered Common Warrants
and a trading market is not expected to develop.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Rights as a Stockholder</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Except as otherwise provided in the Offered Common
Warrants or by virtue of a holder&#8217;s ownership of shares of our Common Stock, the holders of the Offered Common Warrants do not have
the rights or privileges of holders of our Common Stock, including any voting rights, unless and until they exercise their Offered Common
Warrants.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Amendments</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Offered Common Warrants may be amended with
the written consent of the holder of such Offered Common Warrant and us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Listing</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There is no established public trading market
for the Offered Common Warrants, and we do not expect a market to develop. In addition, we do not intend to apply for listing of the Offered
Common Warrants on any national securities exchange.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 195; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->181<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">&#160;</p><div>

</div><!-- Field: Split-Segment; Name: 3 --><div>

</div><div><a id="a_024"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>SECURITIES ACT RESTRICTIONS ON RESALE OF OUR
SECURITIES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Rule 144</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Pursuant to Rule 144 under
the Securities Act (&#8220;Rule 144&#8221;), a person who has beneficially owned restricted shares of our Common Stock or restricted Warrants
for at least six months would be entitled to sell their securities provided that (i) such person is not deemed to have been one of our
affiliates at the time of, or at any time during the three months preceding, a sale and (ii) we are subject to the Exchange Act periodic
reporting requirements for at least three months before the sale and has filed all required reports under Section 13 or 15(d) of the Exchange
Act during the 12 months (or such shorter period as we were required to file reports) preceding the sale.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Persons who have beneficially
owned restricted shares of our Common Stock or restricted Warrants for at least six months but who are our affiliates at the time of,
or at any time during the three months preceding, a sale, would be subject to additional restrictions, by which such person would be entitled
to sell within any three-month period only a number of securities that does not exceed the greater of:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1% of the total number of shares of our Common Stock or Warrants then outstanding, as applicable; or</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the average weekly reported trading volume of our Common Stock or our Warrants, as applicable, during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Sales by our affiliates under
Rule 144 are also limited by manner of sale provisions and notice requirements and to the availability of current public information about
us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Restrictions on the Use of Rule 144 by Shell
Companies or Former Shell Companies</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Rule 144 is not available
for the resale of securities initially issued by shell companies (other than business-combination related shell companies) or issuers
that have been at any time previously a shell company. However, Rule 144 also includes an important exception to this prohibition if the
following conditions are met:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the issuer of the securities that was formerly a shell company has ceased to be a shell company;</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act;</span></td></tr>
</table><div>

</div><p style="margin: 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="text-align: justify; width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required to file such reports and materials) other than Form 8-K reports; and</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 24px">&#160;</td>
    <td style="width: 24px; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">at least one year has elapsed from the time that the issuer filed current Form 10-type information with the SEC reflecting its status as an entity that is not a shell company.</span></td></tr>
  </table><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We are no longer a shell
company and, as a result, once the conditions set forth in the exceptions listed above are satisfied, Rule 144 will become available for
the resale of shares of Common Stock.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Registration Rights</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Each of the Investor Rights
Agreement, the Keystone Registration Rights Agreements, the Arena Purchase Agreement, the Fee Modification Agreements and the Liquidated
Damages Modification Agreement provides for certain registration rights. For additional information, see the subsections entitled &#8220;<i>Description
of Securities&#8212;Registration Rights</i>.&#8221;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="a_025"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PLAN OF DISTRIBUTION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have engaged JonesTrading Institutional Services
LLC, or the placement agent, to act as our exclusive&#160;placement agent&#160;to solicit offers to purchase the shares of our Common
Stock,&#160;Pre-Funded Warrants&#160;and Offered Common Warrants offered by this prospectus pursuant to a placement agency agreement.
The placement agent is not purchasing or selling any such securities, nor is it required to arrange for the purchase and sale of any specific
number or dollar amount of such securities, other than to use their &#8220;reasonable best efforts&#8221; to arrange for the sale of such
securities by us. Therefore, we may not sell all of the shares of Common Stock,&#160;Pre-Funded Warrants&#160;and Common Warrants being
offered. The terms of this offering were subject to market conditions and negotiations between us, the placement agent and prospective
investors. The placement agent will have no authority to bind us. This is a best efforts offering and there is no minimum offering amount
required as a condition to the closing of this offering. The placement agent may retain sub-agents and selected dealers in connection
with this offering. Investors purchasing securities offered hereby will have the option to execute a securities purchase agreement with
us. In addition to rights and remedies available to all purchasers in this offering under federal securities and state law, the purchasers
who enter into a securities purchase agreement will also be able to bring claims of breach of contract against us.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The nature of the representations, warranties
and covenants in the placement agency agreement shall include:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">standard issuer representations and warranties on matters
such as organization, qualification, authorization, no conflict, no governmental filings required, current in SEC filings, no litigation,
labor or other compliance issues, environmental, intellectual property and title matters and compliance with various laws such as the
Foreign Corrupt Practices Act; and</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left">&#9679;</td><td style="text-align: justify">covenants regarding matters such as no integration with other
offerings, filing of a Current Report on Form 8-K to disclose the consummation of the offering and entry in securities purchase agreements
and the placement agency agreement, no shareholder rights plans, no material nonpublic information, use of proceeds, indemnification,
reservation and listing of common stock.</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Delivery of the shares of Common Stock,&#160;Pre-Funded
Warrants&#160;and Offered Common Warrants offered hereby is expected to occur on or about &#160;&#160;&#160;&#160;&#160;, 2024, subject
to satisfaction of certain customary closing conditions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have agreed to pay the placement agent an aggregate
fee equal to [7]% of the gross proceeds received in the offering. In addition, we have agreed to reimburse the placement agent for its
legal fees and expenses and other out-of-pocket expenses in an amount up to $100,000 and clearing expenses of $ [__].</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We estimate the total expenses of this offering
paid or payable by us, exclusive of the placement agent&#8217;s cash fee of 7% of the gross proceeds and expenses, will be approximately
$ [___]. After deducting the fees due to the placement agent and our estimated expenses in connection with this offering, we expect the
net proceeds from this offering will be approximately $[____] million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table shows the per share and total
cash fees we will pay to the&#160;placement agent in connection with the sale of the Common Stock,&#160;Pre-Funded Warrants, Offered&#160;Common
Warrants and shares of Common Stock underlying the&#160;Pre-Funded Warrants&#160;and Offered Common Warrants pursuant to this prospectus.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-bottom: 1.5pt; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; text-align: center; font-weight: bold">&#160;</td>
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    <td style="padding-bottom: 1.5pt; font-weight: bold; text-align: center">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Per Pre-Funded<br/> Warrant and&#160;Offered<br/> Common Warrant</td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt; text-align: center; font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 64%">Public offering price</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">[__]</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">[__]</td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">[__]</td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Placement agent fees</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">[__]</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">[__]</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">[__]</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Proceeds, before expenses, to us</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">[__]</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">[__]</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right">[__]</td><td style="text-align: left">&#160;</td></tr>
  </table><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Indemnification</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have agreed to indemnify the placement agent
against certain liabilities, including liabilities under the Securities Act and liabilities arising from breaches of representations and
warranties contained in our engagement letter with the placement agent. We have also agreed to contribute to payments the placement agent
may be required to make in respect of such liabilities.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;<b>Lock-up Agreements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Each of our executive officers and directors have
agreed with the placement agent to be subject to a lock-up period of [___] days following the date of closing of the offering pursuant
to this prospectus. This means that, during the applicable lock-up period, we and such persons may not offer for sale, contract to sell,
sell, distribute, grant any option, right or warrant to purchase, pledge, hypothecate or otherwise dispose of, directly or indirectly,
any of our shares of Common Stock or any securities convertible into, or exercisable or exchangeable for, shares of Common Stock, subject
to customary exceptions. The placement agent may waive the terms of these lock-up agreements in its sole discretion and without notice.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The ability to pursue a claim for breach of contract
is material to larger purchasers in this offering as a means to enforce the following covenants uniquely available to them under the securities
purchase agreement: (i) a covenant to not enter into variable rate financings for a period of [____] following the closing of the offering,
subject to an exception; and (ii) a covenant to not enter into any equity financings for [____] from closing of the offering, subject
to certain exceptions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Other Relationships</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">From time to time, the placement agent may provide
in the future various advisory, investment and commercial banking and other services to us in the ordinary course of business, for which
they have received and may continue to receive customary fees and commissions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Regulation M Compliance</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The placement agent may be deemed to be an underwriter
within the meaning of Section 2(a)(11) of the Securities Act, and any commissions received by it and any profit realized on the sale of
our securities offered hereby by it while acting as principal might be deemed to be underwriting discounts or commissions under the Securities
Act. The&#160;placement agent will be required to comply with the requirements of the Securities Act and the Exchange Act, including,
without limitation, Rule 10b-5 and Regulation M under the Exchange Act. These rules and regulations may limit the timing of purchases
and sales of our securities by the placement agent. Under these rules and regulations, the&#160;placement agent may not (i) engage in
any stabilization activity in connection with our securities; and (ii) bid for or purchase any of our securities or attempt to induce
any person to purchase any of our securities, other than as permitted under the Exchange Act, until they have completed their participation
in the distribution.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Determination of Offering Price</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The actual offering price of the securities we
are offering were negotiated between us, the placement agent and the investors in the offering based on the trading of our Common Stock
prior to the offering, among other things. Other factors considered in determining the public offering price of the securities we are
offering, as well as the exercise price of the Offered Common Warrants and Pre-Funded Warrants that we are offering, include our history
and prospects, the stage of development of our business, our business plans for the future and the extent to which they have been implemented,
an assessment of our management, the general conditions of the securities markets at the time of the offering and such other factors as
were deemed relevant.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->184<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Electronic Distribution</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A prospectus in electronic format may be made
available on a website maintained by the placement agent. In connection with the offering, the placement agent or selected dealers may
distribute prospectuses electronically. No forms of electronic prospectus other than prospectuses that are printable as Adobe&#174; PDF
will be used in connection with this offering.</p><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Other than the prospectus in electronic format,
the information on the placement agent&#8217;s website and any information contained in any other website maintained by the placement
agent is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or
endorsed by us or the placement agent in its capacity as placement agent and should not be relied upon by investors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Certain Relationships</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The placement agent and its affiliates have provided
and may in the future provide, from time to time, investment banking and financial advisory services to us in the ordinary course of business,
for which they may receive customary fees and commissions.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Trading Market</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="text-indent: 0.25in; font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our Common Stock is listed on the Nasdaq Global
Market under the symbol &#8220;CERO.&#8221; There is no established public trading market for&#160;the Pre-Funded Warrants&#160;or the
Offered Common Warrants to be sold in this offering, and we do not expect a market for the Pre-Funded Warrants or the Offered Common Warrants
to develop. In addition, we do not intend to apply for listing of the Pre-Funded Warrants or Offered Common Warrants on any national securities
exchange.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></p><div>

</div><!-- Field: Page; Sequence: 199; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><!-- Field: Sequence; Type: Arabic; Name: PageNo -->185<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><div><a id="a_026"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>LEGAL MATTERS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Goodwin Procter LLP has passed
upon the validity of the shares of our Common Stock, Pre-Funded Warrants and Offered Common Warrants offered by this prospectus and certain
other legal matters related to this prospectus. Certain legal matters will be passed upon for the placement agent by Ellenoff Grossman
&amp; Schole LLP.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><div><a id="a_027"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>EXPERTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The financial statements
of Phoenix Biotech Acquisition Corp. as of December 31, 2023 and 2022, and each of the years in the two-year period ended December 31,
2023, included in this prospectus have been audited by Citrin Cooperman &amp; Company, LLP, an independent registered public accounting
firm, as stated in their report, which contains an explanatory paragraph related to the substantial doubt about PBAX&#8217;s ability to
continue as a going concern. Such financial statements are included in reliance upon the report of such firm as experts in accounting
and auditing.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The financial statements
of CERo Therapeutics, Inc. as of December 31, 2023 and 2022, and for each of the two years in the period ended December 31, 2023, included
in this prospectus have been audited by Wolf &amp; Company, P.C., an independent registered public accounting firm, as stated in their
report. Such financial statements are included in reliance upon such report given on the authority of such firm as experts in accounting
and auditing.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-variant: small-caps"><b>&#160;</b></span></p><div>

</div><div><a id="a_028"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>WHERE YOU CAN FIND MORE INFORMATION</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We have filed a registration
statement on Form S-1, including exhibits, under the Securities Act with respect to the shares of our Common Stock offered by this prospectus.
This prospectus constitutes only a part of the registration statement. Some items are contained in exhibits to the registration statement
as permitted by the rules and regulations of the SEC. For further information with respect to us and our securities, we refer you to the
registration statement, including the exhibits filed as a part of the registration statement. Statements contained in this prospectus
concerning the contents of any contract or document referred to are not necessarily complete. If a contract or document has been filed
as an exhibit to the registration statement, please see the copy of the contract or document that has been filed. Each statement in this
prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In addition, we file annual,
quarterly and current reports, proxy statements and other information with the SEC. Our SEC filings are available to the public on a website
maintained by the SEC located at <i>www.sec.gov. </i>We also maintain a website at <i>www.cero.bio/investors. </i>Through our website,
we make available, free of charge, annual, quarterly and current reports, proxy statements and other information as soon as reasonably
practicable after they are electronically filed with, or furnished to, the SEC. The information contained on, or that may be accessed
through, our website is not part of, and is not incorporated into, this prospectus. Information contained on our website is not a part
of or incorporated by reference into this prospectus and the inclusion of our website and investor relations website addresses in this
prospectus is an inactive textual reference only.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>


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</div><div><a id="a_029"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>INDEX TO FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>CERO THERAPEUTICS HOLDINGS, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Unaudited Financial Statements as of September 30, 2024 and December
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>PHEONIX BIOTECH ACQUISITION CORP.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Audited Financial Statements as of and for the years ended December
31, 2023 and 2022</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><span style="font-variant: small-caps"><b>&#160;</b></span></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-30</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>CERO THERAPEUTICS, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Audited Financial Statements as of and for the years ended December
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-51</span></td></tr>
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    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-52</span></td></tr>
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    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-53</span></td></tr>
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    <td style="text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-54</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="f_001"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>CERO THERAPEUTICS HOLDINGS, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>CONDENSED CONSOLIDATED BALANCE SHEETS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c1" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeaseLiabilityCurrent" scale="0" unitRef="usd" id="ixv-34970">931,023</ix:nonFraction></td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Common stock warrant liability</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-3">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DerivativeLiabilitiesCurrent" scale="0" unitRef="usd" id="ixv-34975">320,117</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c1" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeaseLiabilityNoncurrent" scale="0" unitRef="usd" id="ixv-34978">771,525</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeaseLiabilityNoncurrent" scale="0" unitRef="usd" id="ixv-34979">1,575,499</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 0.25in">Total liabilities</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c1" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:Liabilities" scale="0" unitRef="usd" id="ixv-34980">10,194,422</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c2" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:Liabilities" scale="0" unitRef="usd" id="ixv-34981">5,082,653</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Commitments and contingencies</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-4">&#160;</div></td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-5">&#160;</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-6">&#160;</div></td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-7">&#160;</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Series Seed: <ix:nonFraction contextRef="c3" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:TemporaryEquitySharesAuthorized" scale="0" unitRef="shares" id="ixv-34983"><ix:nonFraction contextRef="c3" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:TemporaryEquitySharesIssued" scale="0" unitRef="shares" id="ixv-34984"><ix:nonFraction contextRef="c3" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:TemporaryEquitySharesOutstanding" scale="0" unitRef="shares" id="ixv-34985">5,155,703</ix:nonFraction></ix:nonFraction></ix:nonFraction> shares authorized, issued and outstanding at December 31, 2023; aggregate liquidation preference of $<ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:TemporaryEquityLiquidationPreference" scale="0" unitRef="usd" id="ixv-34986">4,154,981</ix:nonFraction> at December 31, 2023</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-8">-</div></td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c3" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:TemporaryEquityCarryingAmountAttributableToParent" scale="0" unitRef="usd" id="ixv-34987">4,077,560</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 0.25in">Series A: <ix:nonFraction contextRef="c6" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:TemporaryEquitySharesAuthorized" scale="0" unitRef="shares" id="ixv-34988">24,614,402</ix:nonFraction> shares authorized, <ix:nonFraction contextRef="c6" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:TemporaryEquitySharesIssued" scale="0" unitRef="shares" id="ixv-34989"><ix:nonFraction contextRef="c6" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:TemporaryEquitySharesOutstanding" scale="0" unitRef="shares" id="ixv-34990">22,764,764</ix:nonFraction></ix:nonFraction> shares issued and outstanding at December 31, 2023; aggregate liquidation preference of $<ix:nonFraction contextRef="c6" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:TemporaryEquityLiquidationPreference" scale="0" unitRef="usd" id="ixv-34991">39,999,967</ix:nonFraction> at December 31, 2023</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-9">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c6" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:TemporaryEquityCarryingAmountAttributableToParent" scale="0" unitRef="usd" id="ixv-34992">38,023,784</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 27pt">Total convertible preferred stock</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-10">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c6" decimals="0" format="ixt:num-dot-decimal" name="cero:ConvertiblePreferredStock" scale="0" unitRef="usd" id="ixv-34993">42,101,344</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Stockholders&#8217; deficit</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Series C Convertible Preferred stock, $<ix:nonFraction contextRef="c7" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockParOrStatedValuePerShare" scale="0" unitRef="usdPershares" id="ixv-34994">0.0001</ix:nonFraction>&#160;par value;&#160;<ix:nonFraction contextRef="c7" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockSharesAuthorized" scale="0" unitRef="shares" id="ixv-34995"><ix:nonFraction contextRef="c7" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockSharesIssued" scale="0" unitRef="shares" id="ixv-34996"><ix:nonFraction contextRef="c7" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockSharesOutstanding" scale="0" unitRef="shares" id="ixv-34997">2,853</ix:nonFraction></ix:nonFraction></ix:nonFraction>&#160;shares authorized, issued and outstanding at September 30, 2024</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c7" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockValue" scale="0" unitRef="usd" id="ixv-34998">1,249,999</ix:nonFraction></td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-11">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Series A Convertible Preferred stock, $<ix:nonFraction contextRef="c9" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockParOrStatedValuePerShare" scale="0" unitRef="usdPershares" id="ixv-34999">0.0001</ix:nonFraction>&#160;par value;&#160;<ix:nonFraction contextRef="c9" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockSharesAuthorized" scale="0" unitRef="shares" id="ixv-35000">12,580</ix:nonFraction>&#160;shares authorized;&#160;<ix:nonFraction contextRef="c9" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockSharesIssued" scale="0" unitRef="shares" id="ixv-35001"><ix:nonFraction contextRef="c9" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockSharesOutstanding" scale="0" unitRef="shares" id="ixv-35002">3,075</ix:nonFraction></ix:nonFraction> issued and outstanding at September 30, 2024</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c9" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockValue" scale="0" unitRef="usd" id="ixv-35003">1,972,727</ix:nonFraction></td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-12">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Series B Convertible Preferred stock, $<ix:nonFraction contextRef="c11" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockParOrStatedValuePerShare" scale="0" unitRef="usdPershares" id="ixv-35004">0.0001</ix:nonFraction>&#160;par value;&#160;<ix:nonFraction contextRef="c11" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockSharesAuthorized" scale="0" unitRef="shares" id="ixv-35005">626</ix:nonFraction> shares authorized;&#160;<ix:nonFraction contextRef="c11" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockSharesIssued" scale="0" unitRef="shares" id="ixv-35006"><ix:nonFraction contextRef="c11" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockSharesOutstanding" scale="0" unitRef="shares" id="ixv-35007">486</ix:nonFraction></ix:nonFraction> issued and outstanding at September 30, 2024</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c11" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockValue" scale="0" unitRef="usd" id="ixv-35008">360,000</ix:nonFraction></td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-13">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes to the condensed consolidated
financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>


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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->2<!-- Field: /Sequence --></span></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="f_002"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>CERO THERAPEUTICS HOLDINGS, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>(Unaudited)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 19.05pt; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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    <td colspan="2" style="text-align: center">2024</td><td>&#160;</td><td>&#160;</td>
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    <td colspan="2" style="text-align: center">2024</td><td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
    <td>Operating expenses:</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; padding-left: 0.25in">Total operating expenses</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(<ix:nonFraction contextRef="c30" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InvestmentIncomeNet" scale="0" sign="-" unitRef="usd" id="ixv-35067">1,349,347</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(<ix:nonFraction contextRef="c31" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InvestmentIncomeNet" scale="0" sign="-" unitRef="usd" id="ixv-35068">8,404,104</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="border-left: Black 1.5pt solid; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(<ix:nonFraction contextRef="c32" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InvestmentIncomeNet" scale="0" sign="-" unitRef="usd" id="ixv-35069">572,211</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(<ix:nonFraction contextRef="c33" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InvestmentIncomeNet" scale="0" sign="-" unitRef="usd" id="ixv-35070">6,024,395</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Net loss per share:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 4pt; padding-left: 9pt">Basic and diluted</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(<ix:nonFraction contextRef="c29" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareDiluted" scale="0" sign="-" unitRef="usdPershares" id="ixv-35071"><ix:nonFraction contextRef="c29" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareBasic" scale="0" sign="-" unitRef="usdPershares" id="ixv-35072">0.09</ix:nonFraction></ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(<ix:nonFraction contextRef="c30" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareDiluted" scale="0" sign="-" unitRef="usdPershares" id="ixv-35073"><ix:nonFraction contextRef="c30" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareBasic" scale="0" sign="-" unitRef="usdPershares" id="ixv-35074">0.15</ix:nonFraction></ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(<ix:nonFraction contextRef="c31" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareDiluted" scale="0" sign="-" unitRef="usdPershares" id="ixv-35075"><ix:nonFraction contextRef="c31" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareBasic" scale="0" sign="-" unitRef="usdPershares" id="ixv-35076">0.28</ix:nonFraction></ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="border-left: Black 1.5pt solid; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(<ix:nonFraction contextRef="c32" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareDiluted" scale="0" sign="-" unitRef="usdPershares" id="ixv-35077"><ix:nonFraction contextRef="c32" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareBasic" scale="0" sign="-" unitRef="usdPershares" id="ixv-35078">0.06</ix:nonFraction></ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(<ix:nonFraction contextRef="c33" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareDiluted" scale="0" sign="-" unitRef="usdPershares" id="ixv-35079"><ix:nonFraction contextRef="c33" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareBasic" scale="0" sign="-" unitRef="usdPershares" id="ixv-35080">0.67</ix:nonFraction></ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td>Weighted average common shares outstanding:</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-left: 9pt">Basic and diluted</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c33" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding" scale="0" unitRef="shares" id="ixv-35089"><ix:nonFraction contextRef="c33" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:WeightedAverageNumberOfSharesOutstandingBasic" scale="0" unitRef="shares" id="ixv-35090">9,058,608</ix:nonFraction></ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 19.05pt; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes to the condensed consolidated
financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


</div><!-- Field: Page; Sequence: 203; Value: 1 --><div>
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</div><div><a id="f_003"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>CERO THERAPEUTICS HOLDINGS, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE
PREFERRED<br/>
STOCK AND STOCKHOLDERS&#8217; DEFICIT<br/>
(Unaudited)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td colspan="2" style="text-align: center">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Issuance of common stock from exercise of stock options</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-49">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-50">-</div></td><td style="border-right: Black 1.5pt solid; text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Stock based compensation expense</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-52">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-54">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c53" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AdjustmentsToAdditionalPaidInCapitalShareBasedCompensationStockOptionsRequisiteServicePeriodRecognition" scale="0" unitRef="usd" id="ixv-35105">28,144</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left; padding-bottom: 1.5pt">Net loss</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-56">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">-</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-57">-</div></td><td style="border-right: Black 1.5pt solid; padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-58">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-59">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold">Balance at March 31, 2023 (Predecessor)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c54" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SharesOutstanding" scale="0" unitRef="shares" id="ixv-35108">5,155,703</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c55" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SharesOutstanding" scale="0" unitRef="shares" id="ixv-35110">22,764,764</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">-</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>


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    <td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 8pt">&#160;</span></td><td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 8pt">-</span></td><td style="text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 8pt">&#160;</span></td><td><span style="font-family: Times New Roman, Times, Serif; font-size: 8pt">&#160;</span></td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: center">See accompanying notes to the condensed
consolidated financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>


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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->5<!-- Field: /Sequence --></span></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="f_004"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>CERO THERAPEUTICS HOLDINGS, INC.<br/>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW<br/>
(Unaudited)</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">For the<br/> period from<br/> February 14,<br/> 2024<br/> through<br/> September 30,<br/> 2024<br/> (Successor)</td><td style="padding-bottom: 1.5pt">&#160;</td><td style="border-left: Black 1.5pt solid; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">For the<br/> period from<br/> January 1,<br/> 2024 <br/> through<br/> February 13,<br/> 2024<br/> (Predecessor)</td><td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">For the <br/> nine months<br/> ended<br/> September 30,<br/> 2023 (Predecessor)</td><td style="padding-bottom: 1.5pt">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>Cash flows from operating activities:</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
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    <td style="width: 64%; text-align: left; text-indent: -9pt; padding-left: 0.25in">Net loss</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">(<ix:nonFraction contextRef="c31" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProfitLoss" scale="0" sign="-" unitRef="usd" id="ixv-35269">8,404,104</ix:nonFraction></td><td style="width: 1%; text-align: left">)</td><td style="border-left: Black 1.5pt solid; width: 1%">&#160;</td>
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    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">(<ix:nonFraction contextRef="c33" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProfitLoss" scale="0" sign="-" unitRef="usd" id="ixv-35271">6,024,395</ix:nonFraction></td><td style="width: 1%; text-align: left">)</td></tr>
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    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Adjustments to reconcile net loss to net cash used in operating activities:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Gain from settlement of liabilities with vendors</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Depreciation expense</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Stock-based compensation expense</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c31" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ShareBasedCompensation" scale="0" unitRef="usd" id="ixv-35276">1,899,771</ix:nonFraction></td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c32" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ShareBasedCompensation" scale="0" unitRef="usd" id="ixv-35277">4,431</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c33" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ShareBasedCompensation" scale="0" unitRef="usd" id="ixv-35278">78,919</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c31" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeaseRightOfUseAssetAmortizationExpense" scale="0" unitRef="usd" id="ixv-35279">421,092</ix:nonFraction></td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c32" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeaseRightOfUseAssetAmortizationExpense" scale="0" unitRef="usd" id="ixv-35280">115,859</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Amortization of debt discount</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-162">-</div></td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c32" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AmortizationOfDebtDiscountPremium" scale="0" sign="-" unitRef="usd" id="ixv-35282">1,875</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-163">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Non-cash interest expense</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-164">-</div></td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-165">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Gain on revaluation of derivative liabilities</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c31" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:GainLossOnSaleOfDerivatives" scale="0" unitRef="usd" id="ixv-35284">4,870,000</ix:nonFraction></td><td style="text-align: left">)</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c32" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:GainLossOnSaleOfDerivatives" scale="0" unitRef="usd" id="ixv-35285">320,117</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c33" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:GainLossOnSaleOfDerivatives" scale="0" unitRef="usd" id="ixv-35286">411,232</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Change in assets and liabilities:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Prepaid expenses and other current assets</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c31" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInPrepaidDeferredExpenseAndOtherAssets" scale="0" unitRef="usd" id="ixv-35287">146,618</ix:nonFraction></td><td style="text-align: left">)</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c32" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInPrepaidDeferredExpenseAndOtherAssets" scale="0" sign="-" unitRef="usd" id="ixv-35288">142,687</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c33" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInPrepaidDeferredExpenseAndOtherAssets" scale="0" sign="-" unitRef="usd" id="ixv-35289">41,689</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Accounts payable</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c31" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccountsPayable" scale="0" sign="-" unitRef="usd" id="ixv-35290">360,204</ix:nonFraction></td><td style="text-align: left">)</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c32" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccountsPayable" scale="0" unitRef="usd" id="ixv-35291">128,429</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c33" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccountsPayable" scale="0" unitRef="usd" id="ixv-35292">892,765</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 27pt">Accrued liabilities</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c31" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccruedLiabilities" scale="0" unitRef="usd" id="ixv-35293">1,526,821</ix:nonFraction></td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c32" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccruedLiabilities" scale="0" sign="-" unitRef="usd" id="ixv-35294">50,370</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c33" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInAccruedLiabilities" scale="0" unitRef="usd" id="ixv-35295">229,361</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 27pt">Operating lease liability</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c31" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInOperatingLeaseLiability" scale="0" sign="-" unitRef="usd" id="ixv-35296">520,454</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="border-left: Black 1.5pt solid; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c32" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInOperatingLeaseLiability" scale="0" sign="-" unitRef="usd" id="ixv-35297">121,589</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c33" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInOperatingLeaseLiability" scale="0" sign="-" unitRef="usd" id="ixv-35298">493,587</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.5in">Net cash used in operating activities</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c31" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NetCashProvidedByUsedInOperatingActivities" scale="0" sign="-" unitRef="usd" id="ixv-35299">10,738,473</ix:nonFraction></td><td style="text-align: left">)</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c32" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NetCashProvidedByUsedInOperatingActivities" scale="0" sign="-" unitRef="usd" id="ixv-35300">637,400</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c33" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NetCashProvidedByUsedInOperatingActivities" scale="0" sign="-" unitRef="usd" id="ixv-35301">4,829,217</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Cash flows from financing activities:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Proceeds from issuance of convertible notes</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-166">-</div></td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-167">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c33" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromConvertibleDebt" scale="0" unitRef="usd" id="ixv-35302">605,230</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Issuance costs for convertible notes</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-168">-</div></td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-169">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c33" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RepaymentsOfNotesPayable" scale="0" unitRef="usd" id="ixv-35303">41,194</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Common stock subscription deposit</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-170">-</div></td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-171">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c33" decimals="0" format="ixt:num-dot-decimal" name="cero:CommonStockSubscriptionDeposit" scale="0" sign="-" unitRef="usd" id="ixv-35304">1,875</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Cash proceeds from exercise of common stock options</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-172">-</div></td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-173">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c33" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromIssuanceOfCommonStock" scale="0" unitRef="usd" id="ixv-35305">5,767</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Proceeds from share purchases under ELOC, net of issuance costs of $<ix:nonFraction contextRef="c31" decimals="0" format="ixt:num-dot-decimal" name="cero:NetOfIssuanceCosts" scale="0" unitRef="usd" id="ixv-35306">1,133,333</ix:nonFraction></td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c31" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromIssuanceOfWarrants" scale="0" unitRef="usd" id="ixv-35307">4,139,190</ix:nonFraction></td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-174">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-175">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Proceeds received from sale of shares of Series A Preferred Stock, net of $<ix:nonFraction contextRef="c31" decimals="0" format="ixt:num-dot-decimal" name="cero:SeriesAPreferredStockNetOfIssuanceCosts" scale="0" unitRef="usd" id="ixv-35308">1,096,300</ix:nonFraction> in issuance costs</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c199" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromIssuanceOfPreferredStockAndPreferenceStock" scale="0" unitRef="usd" id="ixv-35309">6,757,700</ix:nonFraction></td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-176">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-177">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Proceeds received from sale of shares of Series B Preferred Stock</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 0.25in">Proceeds from Preferred Warrant exercises</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">&#160;</td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-189">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 27pt">Net cash provided by financing activities</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-190">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Cash, restricted cash and cash equivalents at beginning of period</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c85" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents" scale="0" unitRef="usd" id="ixv-35324">1,601,255</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c47" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents" scale="0" unitRef="usd" id="ixv-35325">6,819,564</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt">Cash, restricted cash and cash equivalents at end of period</td><td style="padding-bottom: 4pt">&#160;</td>
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    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c79" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents" scale="0" unitRef="usd" id="ixv-35328">2,562,025</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left; text-indent: -9pt; padding-left: 9pt">Supplemental cash flow information:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Cash and cash equivalents</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction contextRef="c151" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CashEquivalentsAtCarryingValue" scale="0" unitRef="usd" id="ixv-35329">3,305,448</ix:nonFraction></td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction contextRef="c96" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CashEquivalentsAtCarryingValue" scale="0" unitRef="usd" id="ixv-35330">884,099</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction contextRef="c79" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CashEquivalentsAtCarryingValue" scale="0" unitRef="usd" id="ixv-35331">2,482,269</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Restricted cash</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c151" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RestrictedCashEquivalentsCurrent" scale="0" unitRef="usd" id="ixv-35332">79,756</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c96" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RestrictedCashEquivalentsCurrent" scale="0" unitRef="usd" id="ixv-35333">79,756</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c79" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RestrictedCashEquivalentsCurrent" scale="0" unitRef="usd" id="ixv-35334">79,756</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt">Cash, restricted cash and cash equivalents</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c151" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RestrictedCashAndCashEquivalents" scale="0" unitRef="usd" id="ixv-35335">3,380,204</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c96" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RestrictedCashAndCashEquivalents" scale="0" unitRef="usd" id="ixv-35336">963,855</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c79" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RestrictedCashAndCashEquivalents" scale="0" unitRef="usd" id="ixv-35337">2,562,025</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="font-weight: bold; text-align: left; text-indent: -9pt; padding-left: 9pt">Non-cash financing activities:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt">Issuance of common shares to Keystone Capital LLC for equity line of credit</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c31" decimals="0" format="ixt:num-dot-decimal" name="cero:IssuanceOfCommonSharesToKeystoneCapitalLLCForEquityLineOfCredit" scale="0" unitRef="usd" id="ixv-35338">500,000</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><div style="-sec-ix-hidden: hidden-fact-191">-</div></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><div style="-sec-ix-hidden: hidden-fact-192">-</div></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt">Issuance of common shares to Arena Investors LP for equity line of credit</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c31" decimals="0" format="ixt:num-dot-decimal" name="cero:IssuanceOfSeriesBSharesSoldToInvestors" scale="0" unitRef="usd" id="ixv-35339">500,000</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><div style="-sec-ix-hidden: hidden-fact-193">-</div></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><div style="-sec-ix-hidden: hidden-fact-194">-</div></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td></tr>
  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center">See accompanying notes to the condensed consolidated
financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


</div><!-- Field: Page; Sequence: 206; Value: 1 --><div>
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</div><div><a id="f_005"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; text-align: center"><b>CERO THERAPEUTICS HOLDINGS, INC.<br/>
<span style="text-transform: uppercase">Notes to Condensed CONSOLIDATED Financial Statements</span></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock" id="ixv-24310"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.7pt; text-align: justify; text-indent: -49.7pt"><b>NOTE 1 &#8211;
<span style="text-transform: uppercase">NATURE OF OPERATIONS AND BASIS OF PRESENTATION</span></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Nature of Operations</b> &#8211; CERo Therapeutics
Holdings, Inc. F/K/A Phoenix Biotech Acquisition Corp. (NASDAQ: PBAX, &#8220;PBAX&#8221;) was incorporated in Delaware on June 8, 2021.
PBAX was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar
business combination with one or more businesses (a &#8220;business combination&#8221;).</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Business Combination Agreement</b> - On June
6, 2023, CERo Therapeutics, Inc. (&#8220;Predecessor&#8221;), which was incorporated in Delaware on September 23, 2016, and based in South
San Francisco, California, entered into a Business Combination Agreement and Plan of Reorganization (the &#8220;BCA&#8221;) with PBCE
Merger Sub, Inc., a wholly-owned subsidiary of PBAX, and PBAX, with the surviving operating entity being named CERo Therapeutics Holdings,
Inc. (&#8220;Successor&#8221; or the &#8220;Company&#8221;), and such transaction, the &#8220;Merger&#8221;.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company is focused on genetically engineering
human immune cells to fight cancer. The Predecessor focused on developing the CERo therapeutic platform and had not yet begun clinical
development or product commercialization. The Company&#8217;s efforts will focus on continued product development, including clinical
development, to support regulatory approval to commercialize and subsequent product commercialization.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The BCA was amended on February 5, 2024 and again
on February 13, 2024. The Merger closed on February 14, 2024 (the &#8220;Closing&#8221;), at which time the following occurred:</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

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</div><div>


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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->7<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_2" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company issued, transferred from the Sponsor,
or reserved for issuance an aggregate of <ix:nonFraction contextRef="c216" decimals="INF" format="ixt:num-dot-decimal" name="cero:UnitsIssuedDuringPeriodSharesNewIssues" scale="0" unitRef="shares" id="ixv-35355">8.4</ix:nonFraction> million shares of Common Stock to the holders of Predecessor common stock and Predecessor
preferred stock or reserved for issuance upon exercise of rollover (from Predecessor to Successor) options and warrants as consideration
in the Merger.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Asset Acquisition Method of Accounting </b>-
The Merger was accounted for using the asset acquisition method in accordance with U.S. GAAP. Under this method of accounting, PBAX was
considered to be the accounting acquirer based on the terms of the Merger. Upon consummation of the Merger, the cash on hand resulted
in the equity at risk being considered insufficient for Predecessor to finance its activities without additional subordinated financial
support. Therefore, Predecessor was considered a Variable Interest Entity (&#8220;VIE&#8221;) and the primary beneficiary of Predecessor
was treated as the accounting acquirer. PBAX holds a variable interest in Predecessor and owns&#160;<ix:nonFraction contextRef="c217" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:DerivativeVariableInterestRate" scale="-2" unitRef="pure" id="ixv-35356">100</ix:nonFraction>% of Predecessor&#8217;s equity.
PBAX was considered the primary beneficiary as it has the decision-making rights that gives it the power to direct the most significant
activities. Also, PBAX retained the obligation to absorb the losses and/or receive the benefits of Predecessor that could have potentially
been significant to Predecessor. The Merger was accounted for as an asset acquisition as substantially all of the fair value was concentrated
in IPR&amp;D, an intangible asset. Predecessor&#8217;s assets (except for cash) and liabilities were measured at fair value as of the
transaction date. Consistent with authoritative guidance on the consolidation of a VIE that is not considered a business, differences
in the total purchase price and fair value of assets and liabilities are recorded as a gain or loss to the condensed consolidated statement
of operations. The loss reflected below on the consolidation of the VIE is reflected &#8220;on the line&#8221; (defined below) in the
Company&#8217;s opening accumulated deficit.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Costs incurred in obtaining technology licenses
are charged to research and development expense as IPR&amp;D if the technology licensed has not reached technological feasibility and
has no alternative future use. The IPR&amp;D recorded at the Closing of $<ix:nonFraction contextRef="c217" decimals="-5" format="ixt:num-dot-decimal" name="cero:OpeningAccumulatedDeficit" scale="6" unitRef="usd" id="ixv-35357">45.6</ix:nonFraction>&#160;million is reflected &#8220;on the line&#8221; in the
Company&#8217;s opening accumulated deficit. To estimate the value of the acquired IPR&amp;D, the Company used the avoided cost method,
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the life of Predecessor. The determination of the fair value requires management to make a significant estimate of the return on research
and development expenditures. Changes in these assumptions could have a significant impact on the fair value of the IPR&amp;D. The estimate
of the return on research and development expenditures was based on multiple published studies analyzing actual returns of research and
development expenditures.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="cero_ScheduleOfPurchasePriceCalculationTbaleTextBlock-c0_cont_1" escape="true" name="cero:ScheduleOfPurchasePriceCalculationTbaleTextBlock" id="ixv-35359">The following is a summary of the purchase price
calculation (unaudited).</ix:nonNumeric></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p>

<ix:continuation id="cero_ScheduleOfPurchasePriceCalculationTbaleTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 88%; text-indent: -9pt; padding-left: 9pt">Number of shares of Common Stock</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c217" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:CommonStockOtherSharesOutstanding" scale="0" unitRef="shares" id="ixv-35360">5,000,000</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -9pt; padding-left: 9pt">Total</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Fair value of PBAX founder&#8217;s shares converted to shares of Common Stock and transferred to Predecessor stockholders</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:EquityFairValueAdjustment" scale="0" unitRef="usd" id="ixv-35363">5,118,750</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Fair value of contingent Common Stock consideration</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SaleOfStockConsiderationReceivedPerTransaction" scale="0" unitRef="usd" id="ixv-35364">12,870,000</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">Total Common Stock consideration</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SaleOfStockConsiderationReceivedOnTransaction" scale="0" unitRef="usd" id="ixv-35365">47,238,750</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Assumed liabilities</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:LiabilitiesAssumed1" scale="0" unitRef="usd" id="ixv-35366">3,311,153</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt">Total purchase price</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="cero:TotalPurchasePrice" scale="0" unitRef="usd" id="ixv-35367">50,549,903</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td></tr>
  </table></ix:continuation>


<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><ix:nonNumeric contextRef="c0" continuedAt="cero_ScheduleOfAllocationOfThePurchasePriceTableTextBlock-c0_cont_1" escape="true" name="cero:ScheduleOfAllocationOfThePurchasePriceTableTextBlock" id="ixv-35368">The allocation of the purchase price was as follows (unaudited).</ix:nonNumeric></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

<ix:continuation id="cero_ScheduleOfAllocationOfThePurchasePriceTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 88%; text-indent: -9pt; padding-left: 9pt">Cash</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c220" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:Cash" scale="0" unitRef="usd" id="ixv-35369">963,855</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: White">
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</div><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p>

<ix:continuation id="_ScheduleOfCondensedFinancialStatementsTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Elimination of deferred underwriting fees</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Conversion of CERo bridge notes and accrued interest into Series A preferred stock</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left">Issuance of Series A shares sold to investors</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-248">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left; padding-bottom: 1.5pt">Issuance of common shares to Keystone Capital LLC for equity line of credit</td><td style="padding-bottom: 1.5pt">&#160;</td>
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</div><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Going concern</b> &#8211; The accompanying
unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which
contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company&#8217;s ability to
continue as a going concern is dependent on its ability to raise additional capital to fund its research and development (&#8220;R&amp;D&#8221;)
activities and meet its obligations on a timely basis. As of September 30, 2024, the Company reported $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:DividendIncomeOperatingPaidInCash" scale="6" unitRef="usd" id="ixv-35436">3.4</ix:nonFraction> million of cash, restricted
cash and cash equivalents, with an accumulated deficit of $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="cero:AccumulatedDeficit" scale="6" unitRef="usd" id="ixv-35437">71.6</ix:nonFraction> million. Additional funds are necessary to maintain current operations
and to continue R&amp;D activities. The Company expects to seek additional funding in the form of equity financings or debt, however,
there can be no assurance that sufficient funding will be available to allow the Company to successfully continue its R&amp;D activities
and planned regulatory filings with the FDA. If the Company is unable to obtain necessary funds, significant reductions in spending and
the delay or cancellation of planned activities may be necessary. These actions would have a material adverse effect on the Company&#8217;s
business, results of operations, and prospects. These conditions raise substantial doubt about the Company&#8217;s ability to continue
as a going concern within one year from the date these financial statements are issued. The accompanying unaudited condensed consolidated
financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the
amounts and classification of liabilities that might result from the outcome of this uncertainty.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Risks and uncertainties </b>&#8211; The Company
is subject to all of the risks inherent in an early-stage biotechnology company. These risks include, but are not limited to, limited
management resources, intense competition, and dependence upon the availability of cash to sustain operations. The Company&#8217;s operating
results may be materially affected by the foregoing factors.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&#8217;s research also requires approvals
from the FDA prior to beginning clinical trials and prior to product commercialization. There can be no assurance that the Company&#8217;s
current ongoing research and future clinical development will result in the granting of these required approvals. If the Company is denied
such approvals or such approvals are substantially delayed, they could have a material adverse effect upon the Company&#8217;s future
financial results and cash flows.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_1" escape="true" name="us-gaap:SignificantAccountingPoliciesTextBlock" id="ixv-25233"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.7pt; text-align: justify; text-indent: -49.7pt"><b>NOTE 2 &#8211;
<span style="text-transform: uppercase">Significant Accounting Policies</span></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

<ix:nonNumeric contextRef="c0" continuedAt="_BasisOfAccountingPolicyPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:BasisOfAccountingPolicyPolicyTextBlock" id="ixv-25239"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Basis of presentation </b>&#8211; The accompanying
unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in
the United States of America (&#8220;GAAP&#8221;) for interim financial information and in accordance with the instructions to Form 10-Q
and Article 8-03 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared
in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting.
Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results
of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include
all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating
results and cash flows for the periods presented.</p></ix:nonNumeric>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<ix:continuation continuedAt="_BasisOfAccountingPolicyPolicyTextBlock-c0_cont_2" id="_BasisOfAccountingPolicyPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On February 14, 2024, the Company completed the
Merger with CERo Therapeutics, Inc., with CERo Therapeutics, Inc. surviving the Merger as a wholly-owned subsidiary of the Company, the
accounting acquirer. The transaction was accounted for as a forward Merger asset acquisition.</p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<ix:continuation id="_BasisOfAccountingPolicyPolicyTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Unless the context otherwise requires, the &#8220;Company,&#8221;
for periods prior to the Closing, refers to CERo Therapeutics, Inc. (&#8220;Predecessor&#8221;), and for the periods after the Closing,
refers to CERo Therapeutics Holdings, Inc. (&#8220;Successor&#8221; or the &#8220;Company&#8221;). As a result of the Merger, the results
of operations, financial position and cash flows of the Predecessor and the Company are not directly comparable. CERo Therapeutics, Inc.
was deemed to be the predecessor entity. Accordingly, the historical financial statements of CERo Therapeutics, Inc. became the historical
financial statements of the combined Company, upon the consummation of the Merger. As a result, the financial statements included in this
report reflect (i) the historical operating results of CERo Therapeutics, Inc. prior to the Merger and (ii) the combined results of the
Company, CERo Therapeutics Holdings, Inc., following the Closing. The accompanying unaudited condensed consolidated financial statements
include a Predecessor period, which includes the period through February 13, 2024 concurrent with the Merger, and a Successor period from
February 14, 2024 through September 30, 2024. A black line between the Successor and Predecessor periods has been placed in the condensed
consolidated financial statements and in the tables to the notes to the condensed consolidated financial statements to highlight the lack
of comparability between these two periods.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation></ix:nonNumeric><div>

</div><div>


</div><!-- Field: Page; Sequence: 210; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->10<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c0_cont_2" id="_SignificantAccountingPoliciesTextBlock-c0_cont_1"><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:UseOfEstimates" id="ixv-25263"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Use of estimates </b>&#8211; The preparation
of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of expenses
incurred during the reporting period. Items subject to such estimates and assumptions include the estimates of the fair values of acquired
in-process research and development, convertible preferred stock, common stock, earnout share liabilities, stock-based compensation expense,
the present value of right-to-use assets and lease liabilities, and the valuation allowance associated with deferred tax assets. Actual
results could differ from those estimates.</p></ix:nonNumeric>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

<ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:CashAndCashEquivalentsPolicyTextBlock" id="ixv-25268"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Cash, restricted cash, and cash equivalents
</b>&#8211; The Company considers all highly liquid investments with an original maturity from the date of purchase of three months or
less to be cash equivalents. As of September 30, 2024 for the Company and December&#160;31, 2023 for Predecessor, cash and cash equivalents
consist of cash deposited with banks, including a money market sweep account. Restricted cash for Predecessor and the Company consists
of $<ix:nonFraction contextRef="c85" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RestrictedCash" scale="0" unitRef="usd" id="ixv-35438">74,756</ix:nonFraction> and $<ix:nonFraction contextRef="c240" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RestrictedCash" scale="0" unitRef="usd" id="ixv-35439">74,756</ix:nonFraction>, respectively, held on account by a financial institution as collateral for a demand letter of credit issued as
a real estate security deposit.</p></ix:nonNumeric>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;&#160;</b></p>

<ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ConcentrationRiskCreditRisk" id="ixv-25273"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Concentration of credit risk </b>&#8211; Financial
instruments that potentially subject the Company to credit risk consist primarily of cash, cash equivalents, and restricted cash. The
Company&#8217;s cash, cash equivalents, and restricted cash are on deposit with two financial institutions that management believes are
of sufficiently high credit quality. Deposits at any of the Company&#8217;s financial institutions may, at times, exceed federal insured
limits.</p></ix:nonNumeric>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

<ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:PropertyPlantAndEquipmentPolicyTextBlock" id="ixv-25278"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Property and equipment </b>&#8211; Property
and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated
useful lives of the respective assets, generally <ix:nonNumeric contextRef="c241" continuedAt="_PropertyPlantAndEquipmentUsefulLife-c241_cont_1" format="ixt-sec:durwordsen" name="us-gaap:PropertyPlantAndEquipmentUsefulLife" id="ixv-35440">three</ix:nonNumeric> to <ix:nonNumeric contextRef="c242" format="ixt-sec:durwordsen" name="us-gaap:PropertyPlantAndEquipmentUsefulLife" id="ixv-35441">five<ix:continuation id="_PropertyPlantAndEquipmentUsefulLife-c241_cont_1"> years</ix:continuation></ix:nonNumeric> or the remaining lease term for leasehold improvements, if shorter.
Expenditures for repairs and maintenance are charged to expense as incurred. Upon disposition, the cost and related accumulated depreciation
are removed from the accounts and the resulting gain or loss is reflected in the statements of operations.</p></ix:nonNumeric>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

<ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:ImpairmentOrDisposalOfLongLivedAssetsPolicyTextBlock" id="ixv-25283"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Impairment of long-lived assets </b>&#8211;
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. When such an event occurs, management determines whether there has been an impairment by comparing the
anticipated undiscounted future net cash flows to the related asset&#8217;s carrying value. If an asset is considered impaired, the asset
is written down to fair value, which is determined based either on discounted cash flows or appraised value, depending on the nature of
the asset. Through September 30, 2024, the Predecessor and the Company have not experienced any impairment losses on its long-lived assets.</p></ix:nonNumeric>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

<ix:nonNumeric contextRef="c0" continuedAt="_LesseeLeasesPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:LesseeLeasesPolicyTextBlock" id="ixv-25288"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Leases &#8211; </b>The Company determines if
an arrangement is, or contains, a lease at inception. Right-of-use (&#8220;ROU&#8221;) assets represent the Company&#8217;s right to use
an underlying asset during the lease term, and lease liabilities represent the Company&#8217;s obligation to make lease payments arising
from the lease. ROU assets and lease liabilities are recognized at lease commencement based upon the estimated present value of unpaid
lease payments over the lease term using the Company&#8217;s incremental borrowing rate applicable to the underlying asset unless the
implicit rate is readily determinable. The Company determines the lease term as the noncancellable period of the lease and may include
options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Leases with a term
of 12 months or less are not recognized on the balance sheets.</p></ix:nonNumeric>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<ix:continuation id="_LesseeLeasesPolicyTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Certain leases include variable lease costs to
reimburse the lessor for real estate tax and insurance expenses, and certain non-lease components that transfer a distinct service to
the Lessee, such as common area maintenance services. The Company has elected to separate the accounting for fixed lease components and
variable and non-lease components for real estate and equipment leases. The variable lease costs are recorded on the consolidated statement
of operations as rent expense, within general and administrative expenses. The Company has no financing leases.</p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

<ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:DerivativesPolicyTextBlock" id="ixv-25296"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Derivative Financial Instruments</b>- The Company
evaluates financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives
in accordance with ASC Topic 815, &#8220;Derivatives and Hedging&#8221;. Derivative instruments are initially recorded at fair value on
the grant date and re-valued at each reporting date, with changes in the fair value reported in the statements of operations. Derivative
assets and liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion
of the instrument could be required within 12 months of the balance sheet date.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>


</div><!-- Field: Page; Sequence: 211; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->11<!-- Field: /Sequence --></span></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation id="_SignificantAccountingPoliciesTextBlock-c0_cont_2"><ix:nonNumeric contextRef="c0" continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_1" escape="true" name="us-gaap:FairValueMeasurementPolicyPolicyTextBlock" id="ixv-25314"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Fair value measurements</b> &#8211; Fair value
is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
on the measurement date. In determining fair value, the assumptions that market participants would use in pricing an asset or liability
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

<ix:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_2" id="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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  </table></ix:continuation>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 63pt; text-align: justify; text-indent: -45pt"><b>&#160;</b></p>

<ix:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_3" id="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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    <td style="width: 0.5in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>Level 2</b></span></td>
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Inputs (other than quoted prices included in Level&#160;1) that are either directly or indirectly observable for the asset or liability. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.</span></td></tr>
  </table></ix:continuation>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 63pt; text-align: justify; text-indent: -45pt"><b>&#160;</b></p>

<ix:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_4" id="_FairValueMeasurementPolicyPolicyTextBlock-c0_cont_3"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

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taken or expected to be taken on a tax return. No liability related to uncertain tax positions is recorded in the financial statements.
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accounting standards require the presentation
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is computed by dividing net loss by the weighted average number of shares of Common Stock outstanding for the period. If there are dilutive
securities, diluted income per share is computed by including Common Stock equivalents which includes shares issuable upon the exercise
of stock options, warrants, and conversion of preferred stock into shares of Common Stock, net of any shares assumed to have been purchased
with the proceeds, using the treasury stock method. In periods for which the Company reports a net loss, the Common Stock equivalents
are not included, as they would be anti-dilutive.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p>

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of Common Stock issuable upon conversion or exercise, as applicable, of convertible securities, stock options, and warrants that were
not included in the calculation of diluted net loss per share because such shares are antidilutive:</ix:nonNumeric></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<ix:continuation id="_PropertyPlantAndEquipmentTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.7pt; text-align: justify; text-indent: -49.7pt">&#160;</p><div>


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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:AccountsPayableAndAccruedLiabilitiesDisclosureTextBlock" id="ixv-25580"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.7pt; text-align: justify; text-indent: -49.7pt"><b>NOTE 5 &#8211;
ACCRUED LIABILITIES</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="_ScheduleOfAccruedLiabilitiesTableTextBlock-c0_cont_1" escape="true" name="us-gaap:ScheduleOfAccruedLiabilitiesTableTextBlock" id="ixv-35470">Accrued liabilities consisted of the following:</ix:nonNumeric></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<ix:continuation id="_ScheduleOfAccruedLiabilitiesTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">(Successor)</td><td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">(Predecessor)</td><td style="padding-bottom: 1.5pt">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left">Employee-related liabilities</td><td style="width: 1%">&#160;</td>
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    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c85" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:EmployeeRelatedLiabilitiesCurrent" scale="0" unitRef="usd" id="ixv-35472">68,697</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Accrued taxes</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-259">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Accrued legal expenses</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c151" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AccruedProfessionalFeesCurrent" scale="0" unitRef="usd" id="ixv-35474">172,000</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Accrued interest</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-260">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Penalty for late S-1 filing and effectiveness</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-261">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Accrued consulting and professional services</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-262">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-263">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Accrued clinical services</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c151" decimals="0" format="ixt:num-dot-decimal" name="cero:AccruedClinicalServices" scale="0" unitRef="usd" id="ixv-35480">26,879</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-264">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt">Other accrued expenses</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c85" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherAccruedLiabilitiesCurrent" scale="0" unitRef="usd" id="ixv-35482">1,833</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-bottom: 4pt">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c151" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AccruedLiabilitiesAndOtherLiabilities" scale="0" unitRef="usd" id="ixv-35483">1,692,527</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c85" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AccruedLiabilitiesAndOtherLiabilities" scale="0" unitRef="usd" id="ixv-35484">144,633</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td></tr>
  </table></ix:continuation></ix:nonNumeric><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_LesseeOperatingLeasesTextBlock-c0_cont_1" escape="true" name="us-gaap:LesseeOperatingLeasesTextBlock" id="ixv-25715"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-transform: uppercase"><b>NOTE
6 &#8211; Leases</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company holds a five-year lease for laboratory
and office space. The lease has escalating contractual rent and variable rent components and the Company elected to separate the contractual
and variable elements for valuing the operating lease liability and right-to-use asset. The lease does not have any options for extension
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<ix:continuation id="_LeaseCostTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="text-align: center; border-bottom: Black 1.5pt solid">For the three months<br/> ended September 30,</td><td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">For the<br/> period from<br/> February 14,<br/> 2024 through<br/> September 30,</td><td style="padding-bottom: 1.5pt">&#160;</td><td style="border-left: Black 1.5pt solid; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">2024</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">2023</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">2024</td><td>&#160;</td><td style="border-left: Black 1.5pt solid">&#160;</td>
    <td colspan="2" style="text-align: center">2024</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">2023</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">(Successor)</td><td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">(Predecessor)</td><td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">(Predecessor)</td><td style="padding-bottom: 1.5pt">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>Operating leases:</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
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    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 40%; text-align: left">Operating lease cost</td><td style="width: 1%">&#160;</td>
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    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c32" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeaseCost" scale="0" unitRef="usd" id="ixv-35489">110,885</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt">Variable operating lease cost</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c29" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:VariableLeaseCost" scale="0" unitRef="usd" id="ixv-35491">177,056</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c32" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:VariableLeaseCost" scale="0" unitRef="usd" id="ixv-35494">84,401</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c262" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:VariableLeaseCost" scale="0" unitRef="usd" id="ixv-35495">488,867</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c29" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:LeaseCost" scale="0" unitRef="usd" id="ixv-35496">406,387</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c261" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:LeaseCost" scale="0" unitRef="usd" id="ixv-35497">381,317</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c31" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:LeaseCost" scale="0" unitRef="usd" id="ixv-35498">1,027,262</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="border-left: Black 1.5pt solid; padding-bottom: 4pt">&#160;</td>
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    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c262" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:LeaseCost" scale="0" unitRef="usd" id="ixv-35500">1,184,232</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td></tr>
  </table></ix:continuation>


<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><ix:continuation id="_LesseeOperatingLeasesTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table reconciles the undiscounted
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year</ix:nonNumeric> to the total operating lease liabilities recognized on the Company&#8217;s condensed consolidated balance sheets as of September
30, 2024:</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="_LesseeOperatingLeaseLiabilityMaturityTableTextBlock-c0_cont_1" escape="true" name="us-gaap:LesseeOperatingLeaseLiabilityMaturityTableTextBlock" id="ixv-35514">Maturity of the Company&#8217;s lease liabilities
as of September 30, 2024:</ix:nonNumeric></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<ix:continuation id="_LesseeOperatingLeaseLiabilityMaturityTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: White">
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  </table></ix:continuation></ix:continuation><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-transform: uppercase">&#160;</span></p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_1" escape="true" name="us-gaap:StockholdersEquityNoteDisclosureTextBlock" id="ixv-26018"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.7pt; text-align: justify; text-indent: -49.7pt"><span style="text-transform: uppercase"><b>NOTE
7 &#8211; STOCKHOLDERS&#8217; DEFICIT</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Successor Series A Convertible Preferred
Stock</i></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company designated <ix:nonFraction contextRef="c263" decimals="0" format="ixt:num-dot-decimal" name="cero:NumberOfDesignatedShares" scale="0" unitRef="shares" id="ixv-35521">12,580</ix:nonFraction> shares of its authorized
preferred stock as the Series A Preferred Stock and the rights, preferences and privileges of the Series A Preferred Stock are summarized
below.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Each share of Series A Preferred Stock has a stated
value of $<ix:nonFraction contextRef="c215" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockParOrStatedValuePerShare" scale="0" unitRef="usdPershares" id="ixv-35522">1,000</ix:nonFraction> per share and, when issued, the Series A Preferred Stock was fully paid and non-assessable. The Series A Preferred Stock,
ranks senior to all other Company capital stock unless required holder votes are obtained to create a class of stock senior to Series
A Preferred Stock. The requisite holders of Series A Preferred Stock consented to the issuance of the Series C Preferred Stock described
below, which ranks senior to the Series A Preferred Stock and Series B Preferred Stock.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Dividend and Participation Rights:</i> The
holders of Series A Preferred Stock will be entitled to dividends, on an as-if converted basis, equal to and in the same form as dividends
actually paid on shares of Common Stock, when and if actually paid. Series A Preferred Stockholders will be entitled to participate pro
rata in any purchase rights extended to holders of Common Stock on an as-converted basis.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Conversion:</i> Each holder of Series A Preferred
Stock may convert at any time, all, or any part, of the outstanding Series A Preferred Stock into shares of the Common Stock at the initial
&#8220;Conversion Price&#8221; of $<ix:nonFraction contextRef="c215" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:SharePrice" scale="0" unitRef="usdPershares" id="ixv-35523">10.00</ix:nonFraction>, which is subject to customary adjustments for stock splits. The Company&#8217;s Board of Directors
has the right, at any time, with the written consent of the Required Holders (as defined in the Certificate of Designation of Preferences,
Rights and Limitations of the Series A Convertible Preferred Stock (the &#8220;Series A Certificate of Designations&#8221;)), to lower
the fixed conversion price to any amount and for any period of time. If 90 days or 180 days following the occurrence of the effective
date of the registration statement filed pursuant to the PIPE Registration Rights Agreement, the Conversion Price then in effect is greater
than the greater of $<ix:nonFraction contextRef="c217" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockConvertibleConversionPrice" scale="0" unitRef="usdPershares" id="ixv-35524">1.00</ix:nonFraction> and the Market Price then in effect (the &#8220;Adjustment Price&#8221;), the Conversion Price shall automatically
lower to the Adjustment Price. In connection with such adjustment provisions, the Conversion Price has been reset to $<ix:nonFraction contextRef="c264" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockConvertibleConversionPrice" scale="0" unitRef="usdPershares" id="ixv-35525">1.00</ix:nonFraction>.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

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and during the continuance of a Trigger Event (as defined below), each holder may alternatively elect to convert the Series A Preferred
Stock at the &#8220;Alternate Conversion Price&#8221; equal to the lesser of the Conversion Price and the greater of $<ix:nonFraction contextRef="c265" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockConvertibleConversionPrice" scale="0" unitRef="usdPershares" id="ixv-35526">1.00</ix:nonFraction> (the &#8220;Conversion
Price Floor&#8221;) or <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="cero:WeightedAveragePricePercentage" scale="-2" unitRef="pure" id="ixv-35527">80</ix:nonFraction>% of the 5-day volume weighted average price of a share of Common Stock. Trigger events include customary terms
related to exchange listing, registration rights, failure to deliver shares on conversion or exercise of derivative instruments, or insolvency.
Notwithstanding the Conversion Price Floor, if the Conversion Price Floor is greater than <ix:nonFraction contextRef="c266" decimals="2" format="ixt:num-dot-decimal" name="cero:WeightedAveragePricePercentage" scale="-2" unitRef="pure" id="ixv-35528">80</ix:nonFraction>% of the 5-day volume weighted average price
of a share of Common Stock, then the Conversion Amount (as defined in the Certificates of Designations, (as defined below) is increased
by a multiplier resulting in the convertibility of the shares of Series A Preferred Stock into the number of shares of Common Stock that
would have been issuable if the Alternate Conversion Price had been equal to such lower volume weighted average price. Such multiplier
has been in effect since the registration statement for the resale of shares of Common Stock issuable upon conversion of the Series A
Preferred Stock was declared effective on July 5, 2024 because such effectiveness was after the applicable deadline therefore and, as
a result of such multiplier, such registration statement registered fewer than the maximum number of shares of Common Stock issuable upon
such conversion.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Redemptions:</i> Upon bankruptcy or liquidation,
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amount or the number of shares multiplied by the highest closing price within the preceding 20 days. Additionally, the Company may voluntarily
redeem the Series A Preferred Stock as at <ix:nonFraction contextRef="c268" decimals="2" format="ixt:num-dot-decimal" name="cero:RedemptionPremiumPercentage" scale="-2" unitRef="pure" id="ixv-35531">20</ix:nonFraction>% premium to the greater of the conversion amount or the number of shares multiplied by the
highest closing price within the preceding 20 days.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The holders of the Series A Preferred Stock have
no voting rights.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In February 2024, the Company consummated a private
placement (the &#8220;Series A PIPE Financing&#8221;) of <ix:nonFraction contextRef="c269" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SharesIssued" scale="0" unitRef="shares" id="ixv-35532">10,039</ix:nonFraction> shares of Series A Preferred Stock, warrants to purchase <ix:nonFraction contextRef="c269" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightNumberOfSecuritiesCalledByWarrantsOrRights" scale="0" unitRef="shares" id="ixv-35533">612,746</ix:nonFraction> shares
of Common Stock (the &#8220;February 2024 PIPE Common Warrants&#8221;) and warrants to purchase <ix:nonFraction contextRef="c270" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightNumberOfSecuritiesCalledByWarrantsOrRights" scale="0" unitRef="shares" id="ixv-35534">2,500</ix:nonFraction> shares of Series A Preferred Stock
(the &#8220;Preferred Warrants&#8221;) (See Note 8 below), pursuant to the Amended and Restated Securities Purchase Agreement, dated February
14, 2024, by and among the Company, PBAX and certain accredited investors (the &#8220;Initial Investors&#8221;) for aggregate cash proceeds
to the Company of approximately $<ix:nonFraction contextRef="c271" decimals="-5" format="ixt:num-dot-decimal" name="cero:AggregateCashProceeds" scale="6" unitRef="usd" id="ixv-35535">10.0</ix:nonFraction> million, including cash previously received for bridge loan proceeds.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A portion of such Series A Preferred Stock was
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and the Predecessor&#8217;s convertible notes amounting to $<ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="cero:ConversionOfCERoBridgeNotesAndAccruedInterestIntoSeriesAPreferredStock" scale="0" unitRef="usd" id="ixv-35537">627,154</ix:nonFraction>.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company accounts for preferred stock as either
equity or debt-like securities based on an assessment of the Preferred Stock rights and preferences and applicable authoritative guidance
in ASC 480 and ASC 815, Derivatives and Hedging. The Company has concluded that the Series A and Series B Preferred Stock, which have
no cash redemption features outside of the Company&#8217;s control are treated as equity. The Company has also concluded that the Series
A Common Warrants do not possess redemption features outside of the Company&#8217;s control and are treated as equity.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Due to delayed filing and declaration of effectiveness
relative to the deadlines defined in the Registration Rights Agreement, the Company accrued for an aggregate $<ix:nonFraction contextRef="c217" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncomeTaxExaminationPenaltiesAndInterestAccrued" scale="0" unitRef="usd" id="ixv-35538">608,363</ix:nonFraction> penalty as of June
30, 2024, payable in cash to the holders of Series&#8239;A Preferred Stock.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In the three months ended September 30, 2024,
<ix:nonFraction contextRef="c272" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ConversionOfStockSharesIssued1" scale="0" unitRef="shares" id="ixv-35539">7,005</ix:nonFraction> shares of Series A Preferred Stock were converted into <ix:nonFraction contextRef="c273" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ConversionOfStockSharesIssued1" scale="0" unitRef="shares" id="ixv-35540">108,948,903</ix:nonFraction> shares of Common Stock. As of September 30, 2024, there were
<ix:nonFraction contextRef="c274" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ConversionOfStockSharesIssued1" scale="0" unitRef="shares" id="ixv-35541">3,075</ix:nonFraction> remaining shares of Series A Preferred Stock, which were convertible into <ix:nonFraction contextRef="c275" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ConversionOfStockSharesIssued1" scale="0" unitRef="shares" id="ixv-35542">62,196,602</ix:nonFraction> shares of Common Stock.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>


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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->16<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_3" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Successor Series B Convertible Preferred
Stock</i></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company designated 626 shares of its authorized
preferred stock as Series B Preferred Stock and established the rights, preferences and privileges of the Series B Preferred Stock pursuant
to the Certificate of Designation of Preferences, Rights and Limitations of the Series B Convertible Preferred Stock (the &#8220;Series
B Certificate of Designations&#8221; and, together with the Series A Certificate of Designations, the &#8220;Certificates of Designations&#8221;),
as summarized below. Except as set forth below, the Series B Preferred Stock has terms and provisions that are identical to those of the
Series A Preferred Stock.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On April 1, 2024, we consummated a private placement
of <ix:nonFraction contextRef="c276" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SaleOfStockNumberOfSharesIssuedInTransaction" scale="0" unitRef="shares" id="ixv-35543">626</ix:nonFraction> shares of the Company Series B Preferred Stock, pursuant to the Securities Purchase Agreement, dated March 28, 2024, by and among
us and certain accredited investors (the &#8220;Additional Investors&#8221; and, together with the Initial Investors, the &#8220;PIPE
Investors&#8221;), for aggregate cash proceeds to us of approximately $<ix:nonFraction contextRef="c277" decimals="-5" format="ixt:num-dot-decimal" name="cero:AggregateCashProceeds" scale="6" unitRef="usd" id="ixv-35544">0.5</ix:nonFraction> million. Such private placement closed on April 1, 2024.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The holders of the Series B Preferred Stock have
no voting rights.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Series B Preferred Stock ranks pari passu
with the Series A Preferred Stock.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Due to delayed filing and declaration of effectiveness
relative to the deadlines defined in the Registration Rights Agreement, the Company accrued for an aggregate $<ix:nonFraction contextRef="c278" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncomeTaxExaminationPenaltiesAndInterestAccrued" scale="0" unitRef="usd" id="ixv-35545">37,330</ix:nonFraction> penalty as of June
30, 2024, payable in cash to the holders of Series B Preferred Stock.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In the three months ended September 30, 2024,
<ix:nonFraction contextRef="c279" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ConversionOfStockSharesIssued1" scale="0" unitRef="shares" id="ixv-35546">140</ix:nonFraction> shares of Series B Preferred Stock were converted into <ix:nonFraction contextRef="c280" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ConversionOfStockSharesIssued1" scale="0" unitRef="shares" id="ixv-35547">1,244,040</ix:nonFraction> shares of Common Stock. As of September 30, 2024, there were <ix:nonFraction contextRef="c281" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ConversionOfStockSharesIssued1" scale="0" unitRef="shares" id="ixv-35548">486</ix:nonFraction>
remaining shares of Series B Preferred Stock, which were convertible into <ix:nonFraction contextRef="c282" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ConversionOfStockSharesIssued1" scale="0" unitRef="shares" id="ixv-35549">9,830,097</ix:nonFraction> shares of Common Stock.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Successor Series C Convertible Preferred
Stock</i></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company designated <ix:nonFraction contextRef="c283" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ConversionOfStockSharesIssued1" scale="0" unitRef="shares" id="ixv-35550">2,853</ix:nonFraction> shares of its authorized
preferred stock as the Series C Preferred Stock and the rights, preferences and privileges of the Series C Preferred Stock are summarized
below.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Each share of Series C Preferred Stock has a stated
value of $<ix:nonFraction contextRef="c284" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SharesIssuedPricePerShare" scale="0" unitRef="usdPershares" id="ixv-35551">1,000</ix:nonFraction> per share and, when issued, the Series C Preferred Stock was fully paid and non-assessable. The Series C Preferred Stock,
ranks senior to all other Company capital stock unless required holder votes are obtained to create a class of stock senior to Series
C Preferred Stock.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Ranking: </i>The Series C Preferred Stock are
senior in rank with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding
up of the Company to the Series A Convertible Preferred Stock, the Series B Convertible Preferred Stock, and Common Stock. The Company
shall not, without the consent of the Required Holders, authorize or issue any shares of senior rank with respect to the preferences as
to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company, shares of pari passu rank with
respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company,
or shares of junior ranking stock that have a maturity or redemption date prior to the first anniversary of the Series C Preferred Stock
issuance date.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Dividend and Participation Rights: The holders
of Series C Preferred Stock will be entitled to dividends, on an as-if converted basis, equal to and in the same form as dividends actually
paid on shares of Common Stock, when and if actually paid. Series C Preferred Stockholders will be entitled to participate pro rata in
any purchase rights extended to holders of Common Stock on an as-converted basis.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Conversion:</i> Each holder of Series C Preferred
Stock may convert at any time, all, or any part, of the outstanding Series A Preferred Stock into shares of the Common Stock at the initial
&#8220;Conversion Price&#8221; of $<ix:nonFraction contextRef="c285" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockConvertibleConversionPrice" scale="0" unitRef="usdPershares" id="ixv-35552">0.224</ix:nonFraction>, which is subject to customary adjustments for stock splits.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Alternate Conversion:</i> Following the occurrence
and during the continuance of a Trigger Event (as defined below), each holder may alternatively elect to convert the Series C Preferred
Stock at the &#8220;Alternate Conversion Price&#8221; equal to the lesser of the then current Conversion Price and the greater of $<ix:nonFraction contextRef="c284" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockConvertibleConversionPrice" scale="0" unitRef="usdPershares" id="ixv-35553">0.0196</ix:nonFraction>
(the &#8220;Conversion Price Floor&#8221;) or <ix:nonFraction contextRef="c283" decimals="2" format="ixt:num-dot-decimal" name="cero:PercentageOfWeightedAveragePriceOfAShareOfCommonStock" scale="-2" unitRef="pure" id="ixv-35554">80</ix:nonFraction>% of the trailing 5-day daily volume weighted average price of a share of Common Stock.
Trigger events include customary terms related to exchange listing, registration rights, failure to deliver shares on conversion or exercise
of derivative instruments, or insolvency. Notwithstanding the Conversion Price Floor, if the Conversion Price Floor is greater than <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="cero:PercentageOfWeightedAveragePriceOfAShareOfCommonStock" scale="-2" unitRef="pure" id="ixv-35555">80</ix:nonFraction>%
of the 5-day volume weighted average price of a share of Common Stock, then the Conversion Amount (as defined in the Certificates of Designations)
for such Series C Preferred Stock is increased by a multiplier resulting in the convertibility of the shares of Series C Preferred Stock
into the number of shares of Common Stock that would have been issuable if the Alternate Conversion Price had been equal to such lower
volume weighted average price.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->17<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><ix:continuation continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_4" id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Redemptions:</i> Upon bankruptcy or liquidation,
Series C Preferred Stock will be redeemed at a <ix:nonFraction contextRef="c283" decimals="2" format="ixt:num-dot-decimal" name="cero:PercentageOfRedemptionPremium" scale="-2" unitRef="pure" id="ixv-35556">25</ix:nonFraction>% premium to the conversion amount multiplied by the highest Alternative Conversion Price
within the preceding 20 days multiplied by <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="cero:PercentageOfClosingSalePrice" scale="-2" unitRef="pure" id="ixv-35557">125</ix:nonFraction>% of the greatest closing sale price of the Common Stock on any day immediately following
public announcement of insolvency and the date the entire redemption payment has been made. Additionally, the Company may voluntarily
redeem the Series C Preferred Stock as at <ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="cero:RedemptionPremiumPercentage" scale="-2" unitRef="pure" id="ixv-35558">25</ix:nonFraction>% premium to the greater of the conversion amount or the number of shares multiplied by the
highest closing price within the preceding 20 days.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The holders of the Series C Preferred Stock have
no voting rights.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In September 2024, the Company consummated a private
placement (the &#8220;Series C PIPE Financing&#8221;) of <ix:nonFraction contextRef="c284" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SharesIssued" scale="0" unitRef="shares" id="ixv-35559">2,853</ix:nonFraction> shares of Series C Preferred Stock and warrants to purchase <ix:nonFraction contextRef="c285" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SharesIssued" scale="0" unitRef="shares" id="ixv-35560">8,175,166</ix:nonFraction> shares
of Common Stock (the &#8220;September 2024 PIPE Common Warrants&#8221;) (See Note 8 below), pursuant to the Securities Purchase Agreement,
dated September 25, 2024, by and among the Company and certain accredited investors for aggregate cash proceeds to the Company of approximately
$<ix:nonFraction contextRef="c286" decimals="-4" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromIssuanceOfWarrants" scale="6" unitRef="usd" id="ixv-35561">1.25</ix:nonFraction> million.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company accounts for preferred stock as either
equity or debt-like securities based on an assessment of the Preferred Stock rights and preferences and applicable authoritative guidance
in ASC 480 and ASC 815, Derivatives and Hedging. The Company has concluded that the Series C Preferred Stock, which has no cash redemption
features outside of the Company&#8217;s control are treated as equity. The Company has also concluded that the Series C Common Warrants
do not possess redemption features outside of the Company&#8217;s control and are treated as equity.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Predecessor Preferred Stock Conversion to
Common Stock</i></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At December 31, 2023, Predecessor had <ix:nonFraction contextRef="c23" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CapitalUnitsAuthorized" scale="0" unitRef="shares" id="ixv-35562">75,120,105</ix:nonFraction>
shares of capital stock authorized, consisting of <ix:nonFraction contextRef="c196" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesAuthorized" scale="0" unitRef="shares" id="ixv-35563">45,350,000</ix:nonFraction> shares of Predecessor common stock and <ix:nonFraction contextRef="c196" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ConvertiblePreferredStockSharesIssuedUponConversion" scale="0" unitRef="shares" id="ixv-35564">29,770,105</ix:nonFraction> shares of Predecessor convertible
preferred stock. All classes of the Predecessor&#8217;s stock had a par value of $<ix:nonFraction contextRef="c196" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:CommonStockParOrStatedValuePerShare" scale="0" unitRef="usdPershares" id="ixv-35565">0.0001</ix:nonFraction>. On February 14, 2024, on the close of the Merger,
the Predecessor&#8217;s outstanding convertible preferred stock converted to Common Stock at a conversion ratio of <ix:nonFraction contextRef="c287" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentConvertibleConversionRatio1" scale="0" unitRef="pure" id="ixv-35566">0.0806</ix:nonFraction> and <ix:nonFraction contextRef="c288" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentConvertibleConversionRatio1" scale="0" unitRef="pure" id="ixv-35567">0.1757</ix:nonFraction> shares
of Common Stock for each share of Predecessor Series&#160;Seed Convertible Preferred Stock and Predecessor Series&#160;A Convertible Preferred
Stock, respectively. This resulted in the issuance of <ix:nonFraction contextRef="c289" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockSharesIssued" scale="0" unitRef="shares" id="ixv-35568">415,498</ix:nonFraction> and <ix:nonFraction contextRef="c290" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockSharesIssued" scale="0" unitRef="shares" id="ixv-35569">3,999,997</ix:nonFraction> shares of Common Stock for the Predecessor&#8217;s Series
Seed Preferred Stock and Predecessor Series A Preferred Stock, respectively.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Predecessor&#8217;s Series Seed and Series A Preferred
Stock had cash redemption features outside of its control, and therefore were classified in a mezzanine section presented on the balance
sheets between liabilities and stockholders&#8217; deficit.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Purchase of Common Stock by Keystone Capital
Partners under the Equity Line of Credit (&#8220;ELOC&#8221;)</i></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On February 14, 2024, in conjunction with, and
as a condition to the closing of the Series A PIPE Financing, the Company entered into a common stock purchase agreement (the &#8220;Keystone
Purchase Agreement&#8221;) with Keystone Capital Partners, L.P. (&#8220;Keystone&#8221;), pursuant to which we may sell and issue, and
Keystone is obligated to purchase, up to <ix:nonFraction contextRef="c291" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromIssuanceOfWarrants" scale="0" unitRef="usd" id="ixv-35570">25,000,000</ix:nonFraction> shares subject to the Company obtaining all necessary stockholder approvals to issue
the shares to Keystone. The price of the shares purchased by Keystone under the ELOC is <ix:nonFraction contextRef="c291" decimals="2" format="ixt:num-dot-decimal" name="cero:WeightedAveragePricePercentage" scale="-2" unitRef="pure" id="ixv-35571">90</ix:nonFraction>% of various volume-weighted average price (&#8220;VWAP&#8221;)
and closing price-based formulae, and requires a waiver, should the selling price be below $1.00 per share. As consideration for Keystone&#8217;s
commitment to purchase shares of Common Stock pursuant to the Keystone Purchase Agreement, we issued an aggregate of <ix:nonFraction contextRef="c292" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesIssued" scale="0" unitRef="shares" id="ixv-35572">1,864,345</ix:nonFraction> shares
of Common Stock to Keystone.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In the three and nine months ended September 30,
2024, the Company sold approximately <ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:SaleOfStockNumberOfSharesIssuedInTransaction" scale="6" unitRef="shares" id="ixv-35573">13.0</ix:nonFraction> million shares for gross proceeds of approximately <ix:nonFraction contextRef="c293" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:SaleOfStockNumberOfSharesIssuedInTransaction" scale="6" unitRef="shares" id="ixv-35574">1.7</ix:nonFraction> million, and <ix:nonFraction contextRef="c218" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:SaleOfStockNumberOfSharesIssuedInTransaction" scale="6" unitRef="shares" id="ixv-35575">20.9</ix:nonFraction> million shares for
gross proceeds of approximately $<ix:nonFraction contextRef="c294" decimals="1" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromIssuanceOfCommonStock" scale="0" unitRef="usd" id="ixv-35576">1.7</ix:nonFraction> and $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromIssuanceOfCommonStock" scale="6" unitRef="usd" id="ixv-35577">4.3</ix:nonFraction> million, respectively, under the Keystone ELOC. The Company sought and received a waiver
to sell the shares below $<ix:nonFraction contextRef="c295" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:SaleOfStockPricePerShare" scale="0" unitRef="usdPershares" id="ixv-35578">1.00</ix:nonFraction> per share. The Company also issued <ix:nonFraction contextRef="c296" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodSharesNewIssues" scale="0" unitRef="shares" id="ixv-35579">1,613,944</ix:nonFraction> and <ix:nonFraction contextRef="c0" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodSharesNewIssues" scale="0" unitRef="shares" id="ixv-35580">1,864,295</ix:nonFraction> shares of common stock to Keystone as consideration
for the ELOC in the three-month period ended September 30, 2024 and the period from February 14, 2024 to September 30, 2024, respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->18<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation id="_StockholdersEquityNoteDisclosureTextBlock-c0_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Issuance of Common Stock to Arena Business
Solutions Global SPC II, Ltd. (&#8220;Arena&#8221;) </i></b>&#160;<b><i>for the Arena ELOC</i></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On February 23, 2024, the Company entered into
a common stock purchase agreement (the &#8220;Arena Purchase Agreement&#8221;) with Arena, pursuant to which we may sell and issue, and
Arena is obligated to purchase, up to $<ix:nonFraction contextRef="c297" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:StockRepurchasedDuringPeriodValue" scale="0" unitRef="usd" id="ixv-35581">25,000,000</ix:nonFraction> of Common Stock. The price of the shares purchased by Arena under the ELOC is <ix:nonFraction contextRef="c297" decimals="2" format="ixt:num-dot-decimal" name="cero:VariousVolumeWeightedAveragePricePercentage" scale="-2" unitRef="pure" id="ixv-35582">90</ix:nonFraction>% of
various VWAP and closing price-based formulae, and requires a waiver, should the selling price be below $<ix:nonFraction contextRef="c298" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:SaleOfStockPricePerShare" scale="0" unitRef="usdPershares" id="ixv-35583">0.25</ix:nonFraction> per share. As consideration
for Arena commitment to purchase shares of Common Stock pursuant to the Arena Purchase Agreement, the Company issued no shares and <ix:nonFraction contextRef="c299" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodSharesNewIssues" scale="0" unitRef="shares" id="ixv-35584"><ix:nonFraction contextRef="c300" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodSharesNewIssues" scale="0" unitRef="shares" id="ixv-35585">345,566</ix:nonFraction></ix:nonFraction>
shares of Common Stock to Arena during the three and nine-month period ended September 30, 2024, respectively. The Company has sold no
shares of Common Stock to Arena under the Arena ELOC in the nine-month period ended September 30, 2024.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="cero_WarrantTextBlock-c0_cont_1" escape="true" name="cero:WarrantTextBlock" id="ixv-26185"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.7pt; text-align: justify; text-indent: -49.7pt"><span style="text-transform: uppercase"><b>NOTE
8 &#8211; WarrantS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Accounting for warrants</i></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company accounts for warrants as either equity-classified
or liability-classified instruments based on an assessment of the instruments&#8217; specific terms and applicable authoritative guidance
in ASC 480 and ASC 815, Derivatives and Hedging. The assessment considers whether the instruments are free standing financial instruments
pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements
for equity classification under ASC 815, including whether the instruments are indexed to the Company&#8217;s own common stock and whether
the instrument holders could potentially require &#8220;net cash settlement&#8221; in a circumstance outside of the Company&#8217;s control,
among other conditions for equity classification. This assessment, which requires the use of professional judgment, was conducted at the
time of warrant issuance and as of each subsequent period end date while the instruments are outstanding.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Public Warrants</i></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At September 30, 2024, there were <ix:nonFraction contextRef="c217" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightOutstanding" scale="0" unitRef="shares" id="ixv-35586">9,192,500</ix:nonFraction> Public
Warrants outstanding, each with a right to purchase <ix:nonFraction contextRef="c301" decimals="0" format="ixt-sec:numwordsen" name="us-gaap:SaleOfStockNumberOfSharesIssuedInTransaction" scale="0" unitRef="shares" id="ixv-35587">one</ix:nonFraction> share of Common Stock for $<ix:nonFraction contextRef="c302" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightExercisePriceOfWarrantsOrRights1" scale="0" unitRef="usdPershares" id="ixv-35588">11.50</ix:nonFraction>. The Public Warrants became exercisable <ix:nonNumeric contextRef="c302" format="ixt-sec:durday" name="us-gaap:WarrantsAndRightsOutstandingTerm" id="ixv-35589">30</ix:nonNumeric> days
after the Merger. No warrants will be exercisable for cash unless the Company has an effective and current registration statement covering
the Common Stock issuable upon exercise of the warrants and a current prospectus relating to such Common Stock. The warrants were registered
under a resale registration statement on Form S-1 (File No. 333-279156), which was declared effective by the Securities and Exchange Commission
on July 5, 2024.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Notwithstanding the foregoing, warrant holders
may, during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless
basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that
exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. The Public
Warrants will expire <ix:nonNumeric contextRef="c0" format="ixt-sec:durwordsen" name="cero:WarrantsExpirationTerm" id="ixv-35590">five years</ix:nonNumeric> after the Merger or earlier upon redemption or liquidation.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Once the warrants became exercisable, the Company
may, with <ix:nonNumeric contextRef="c217" format="ixt-sec:durday" name="us-gaap:WarrantsAndRightsOutstandingTerm" id="ixv-35591">30</ix:nonNumeric> days prior notice, redeem the Public Warrants in whole and not in part, at a price of $<ix:nonFraction contextRef="c303" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:WarrantExercisePriceIncrease" scale="0" unitRef="usdPershares" id="ixv-35592">0.01</ix:nonFraction> per warrant if the shares underlying
the warrants are registered and if the closing price of Common Stock equals or exceeds $<ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:WarrantExercisePriceIncrease" scale="0" unitRef="usdPershares" id="ixv-35593">18.00</ix:nonFraction> for <ix:nonNumeric contextRef="c219" format="ixt-sec:duryear" name="cero:NumberOfTradingDays" id="ixv-35594">20</ix:nonNumeric> of the prior <ix:nonNumeric contextRef="c218" format="ixt-sec:durday" name="cero:NumberOfTradingDays" id="ixv-35595">30</ix:nonNumeric> trading days. If
the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the
Public Warrants to do so on a &#8220;cashless basis,&#8221; as described in the warrant agreement.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The exercise price and number of shares of Common
Stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary
dividend or recapitalization, reorganization, merger, or consolidation. However, the warrants will not be adjusted for issuances of Common
Stock at a price below their respective exercise prices. Additionally, in no event will the Company be required to net cash settle the
warrants.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As discussed above, the Company accounts for warrants
as either equity-classified or liability-classified instruments based on an assessment of the instruments&#8217; specific terms and applicable
authoritative guidance in ASC 480 and ASC 815, Derivatives and Hedging. Management has concluded that the Public Warrants and Private
Placement Warrants issued pursuant to the warrant agreement qualify for equity accounting treatment.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric><div>

</div><div>


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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->19<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><ix:continuation continuedAt="cero_WarrantTextBlock-c0_cont_2" id="cero_WarrantTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Conversion warrants</i></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On November 14, 2019, Predecessor issued warrants
to purchase a total of <ix:nonFraction contextRef="c304" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightNumberOfSecuritiesCalledByWarrantsOrRights" scale="0" unitRef="shares" id="ixv-35596">1,849,638</ix:nonFraction> shares of Predecessor Series A Preferred Stock at a price of $<ix:nonFraction contextRef="c305" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightExercisePriceOfWarrantsOrRights1" scale="0" unitRef="usdPershares" id="ixv-35597">1.7571</ix:nonFraction> per share. The warrants were exercisable
into shares of Predecessor Series&#160;A Preferred Stock at the discretion of the holder, at any time in the <ix:nonNumeric contextRef="c306" format="ixt-sec:durwordsen" name="us-gaap:WarrantsAndRightsOutstandingTerm" id="ixv-35598">five years</ix:nonNumeric> after issuance.
The warrants were analyzed and determined to be freestanding instruments issued in a transaction including the conversion or sale of the
Series A Preferred Stock. A warrant to purchase up to <ix:nonFraction contextRef="c307" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightNumberOfSecuritiesCalledByWarrantsOrRights" scale="0" unitRef="shares" id="ixv-35599">426,839</ix:nonFraction> shares of Series A Preferred Stock was issued in a transaction that included
the conversion of <ix:nonFraction contextRef="c308" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ConversionOfStockSharesConverted1" scale="0" unitRef="shares" id="ixv-35600">100</ix:nonFraction> shares of Series 1 Preferred Stock into <ix:nonFraction contextRef="c309" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ConversionOfStockSharesConverted1" scale="0" unitRef="shares" id="ixv-35601">2,845,597</ix:nonFraction> shares of Predecessor Series A Preferred Stock. Another warrant
to purchase up to <ix:nonFraction contextRef="c305" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightNumberOfSecuritiesCalledByWarrantsOrRights" scale="0" unitRef="shares" id="ixv-35602">1,422,799</ix:nonFraction> shares of Series A Preferred Stock was issued concurrent with the purchase of <ix:nonFraction contextRef="c305" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockSharesIssued" scale="0" unitRef="shares" id="ixv-35603">2,845,597</ix:nonFraction> shares of Series A
Preferred Stock. These warrants are collectively referred to as the &#8220;Predecessor preferred stock warrants.&#8221; On February 14,
2024, the Predecessor preferred stock warrants were converted into warrants to purchase up to <ix:nonFraction contextRef="c290" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightNumberOfSecuritiesCalledByWarrantsOrRights" scale="0" unitRef="shares" id="ixv-35604">324,999</ix:nonFraction> shares of Common Stock (&#8220;Conversion
Warrants&#8221;).</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Conversion Warrants will initially be exercisable
for Common Stock at an exercise price equal to $<ix:nonFraction contextRef="c213" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightExercisePriceOfWarrantsOrRights1" scale="0" unitRef="usdPershares" id="ixv-35605">10.00</ix:nonFraction>. The exercise price is subject to adjustment for stock splits, combinations and
similar events, and, in the event of stock dividends and splits, the number of shares of Common Stock issuable upon the exercise of the
Conversion Warrant will also be adjusted so that the aggregate exercise price shall be the same immediately before and immediately after
any such adjustment.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Conversion Warrants will expire <ix:nonNumeric contextRef="c0" format="ixt-sec:durwordsen" name="cero:WarrantsExpirationTerm" id="ixv-35606">five years</ix:nonNumeric>
after the original Predecessor warrants were issued, or November 14, 2024. The Conversion Warrants will automatically convert at the end
of the exercise period if the fair market value (as determined in the Conversion Warrants) of a share of Common Stock underlying the Conversion
Warrants is greater than the exercise price in effect on such date.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As discussed above, Predecessor accounts for warrants
as either equity-classified or liability-classified instruments based on an assessment of the instruments&#8217; specific terms and applicable
authoritative guidance in ASC 480 and ASC 815, Derivatives and Hedging. Based on the exercisability of the Predecessor Preferred Warrants
into Series A Preferred Stock, which had a cash redemption feature outside of the control of Predecessor, the Predecessor warrants were
recorded as a derivative liability and were revalued at each reporting period, with the change in value being recorded on the Statement
of Operations.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&#8217;s Conversion Warrants are exercisable
into Common Stock, which has no cash redemption features that require liability treatment and the Company recorded the Conversion Warrants
as equity.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>February 2024 PIPE Common Warrants (Successor)</i></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&#8217;s February 2024 PIPE Common
Warrants are initially exercisable for cash at an exercise price equal to the greater of (x) $<ix:nonFraction contextRef="c310" decimals="2" format="ixt:num-dot-decimal" name="cero:AdjustedStockSpilits" scale="0" unitRef="usdPershares" id="ixv-35607">9.20</ix:nonFraction> (as adjusted for stock splits, stock
dividends, stock combinations, recapitalizations and similar events) and (y) the closing price of the Common Stock on the trading day
immediately prior to the Subscription Date (as defined in the February 2024 PIPE Common Warrant Agreement). The exercise price is subject
to adjustment for stock splits, combinations and similar events, and, in the event of stock dividends and splits, the number of shares
of Common Stock issuable upon the exercise of the February 2024 PIPE Common Warrants will also be adjusted so that the aggregate exercise
price shall be the same immediately before and immediately after any such adjustment. On Stockholder approval for the issuance of shares
underlying the warrants, granted April 30, 2024, the exercise price of the February 2024 PIPE Common Warrants was adjusted to $<ix:nonFraction contextRef="c310" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:WarrantExercisePriceIncrease" scale="0" unitRef="usdPershares" id="ixv-35608">1.39</ix:nonFraction> per
share, per the terms of the Securities Purchase Agreement.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The February 2024 PIPE Common Warrants will be
exercisable beginning six months after the issuance date (the &#8220;Initial Exercisability Date&#8221;) and expiring on the third anniversary
of the Initial Exercisability Date. The February 2024 PIPE Common Warrants require &#8220;buy-in&#8221; payments to be made by us for
failure to deliver any shares of Common Stock issuable upon exercise.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If at the time of exercise of the February 2024
PIPE Common Warrants, there is no effective registration statement registering the shares of the Common Stock underlying the Common February
2024 PIPE Warrants, such warrants may be exercised on a cashless basis pursuant to their terms.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><ix:continuation continuedAt="cero_WarrantTextBlock-c0_cont_3" id="cero_WarrantTextBlock-c0_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If we issue options, convertible securities, warrants,
shares, or similar securities to holders of Common Stock, each holder of February 2024 PIPE Common Warrants has the right to acquire the
same as if the holder had exercised its February 2024 PIPE Common Warrants. The holders of February 2024 PIPE Common Warrants are entitled
to receive any dividends paid or distributions made to our holders of Common Stock on an &#8220;as if converted&#8221; basis.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The February 2024 PIPE Common Warrants prohibit
us from entering into specified fundamental transactions unless the successor entity assumes all of our obligations under the February
2024 PIPE Common Warrants under a written agreement before the transaction is completed. Upon specified corporate events, a holder of
February 2024 PIPE Common Warrants will thereafter have the right to receive upon an exercise such shares, securities, cash, assets or
any other property whatsoever which the holder would have been entitled to receive upon the happening of the applicable corporate event
had the February 2024 PIPE Common Warrants been exercised immediately prior to the applicable corporate event. When there is a transaction
involving specified changes of control, a holder of February 2024 PIPE Common Warrants can request the Company to exchange the then unexercised portion of their February 2024 PIPE Common Warrants for consideration equal to the Black-Scholes
value thereof, which shall be settled, at the option of the Company in either (i) the form of rights convertible into the consideration
receivable by holders of the underlying shares of common stock, based upon the value of the shares of the successor entity over a specified
period or (ii) cash in an amount equal to the Black-Scholes value.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&#8217;s February 2024 PIPE Common
Warrants are exercisable into Common Stock, which has no cash redemption features that require liability treatment. The Company has recorded
the February 2024 PIPE Common Warrants as equity.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>September 2024 PIPE Common Warrants (Successor)</i></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&#8217;s September 2024 PIPE Common
Warrants are initially exercisable for cash at an initial exercise price equal to $<ix:nonFraction contextRef="c217" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightExercisePriceOfWarrantsOrRights1" scale="0" unitRef="usdPershares" id="ixv-35609">0.098</ix:nonFraction> (as adjusted for stock splits, stock dividends,
stock combinations, recapitalizations and similar events). The exercise price is also subject to adjustment for the sale of Common Stock,
or issuance or modification of options to a result in the purchase of a Common Share at an effective price per share lower than the then
current September 2024 PIPE Common Warrant exercise price. Additionally, should the Company issue any variable priced convertible securities,
the holders may elect an alternative exercise price that allows exercise at the effective purchase price applicable to the convertible
security.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The September 2024 PIPE Common Warrants will be
exercisable beginning six months after the issuance date (the &#8220;Initial Exercisability Date&#8221;) and expiring on the third anniversary
of the Initial Exercisability Date. The September 2024 PIPE Common Warrants require &#8220;buy-in&#8221; payments to be made by us for
failure to deliver any shares of Common Stock issuable upon exercise.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If at the time of exercise of the September 2024
PIPE Common Warrants, there is no effective registration statement registering the shares of the Common Stock underlying the Common September
2024 PIPE Warrants, such warrants may be exercised on a cashless basis pursuant to their terms.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">If we issue options, convertible securities, warrants,
shares, or similar securities to holders of Common Stock, each holder of September 2024 PIPE Common Warrants has the right to acquire
the same as if the holder had exercised its September 2024 PIPE Common Warrants. The holders of September 2024 PIPE Common Warrants are
entitled to receive any dividends paid or distributions made to our holders of Common Stock on an &#8220;as if converted&#8221; basis.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The September 2024 PIPE Common Warrants prohibit
us from entering into specified fundamental transactions unless the successor entity assumes all of our obligations under the September
2024 PIPE Common Warrants under a written agreement before the transaction is completed. Upon specified corporate events, a holder of
September 2024 PIPE Common Warrants will thereafter have the right to receive upon an exercise such shares, securities, cash, assets or
any other property whatsoever which the holder would have been entitled to receive upon the happening of the applicable corporate event
had the September 2024 PIPE Common Warrants been exercised immediately prior to the applicable corporate event. When there is a transaction
involving specified changes of control, a holder of September 2024 PIPE Common Warrants can request the Company to exchange the then unexercised portion of their September 2024 PIPE Common Warrants for consideration equal to the Black-Scholes
value thereof, which shall be settled, at the option of the Company in either (i) the form of rights convertible into the consideration
receivable by holders of the underlying shares of common stock, based upon the value of the shares of the successor entity over a specified
period or (ii) cash in an amount equal to the Black-Scholes value.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>


</div><!-- Field: Page; Sequence: 221; Value: 1 --><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation id="cero_WarrantTextBlock-c0_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&#8217;s September 2024 PIPE Common
Warrants are exercisable into Common Stock, which has no cash redemption features that require liability treatment. The Company has recorded
the September 2024 PIPE Common Warrants as equity.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Preferred Warrants</i></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

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and, in the event of stock dividends and splits, the number of shares of Series A Preferred Stock issuable upon the exercise of the Preferred
Warrant will also be adjusted so that the aggregate exercise price shall be the same immediately before and immediately after any such
adjustment.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Preferred Warrants will expire on the first
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have the right, conditional upon the share
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Preferred Warrants prohibit us from entering
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agreement before the transaction is completed. Upon specified corporate events, a holder of the Preferred Warrants will thereafter have
the right to receive upon an exercise such shares, securities, cash, assets or any other property whatsoever which the holder would have
been entitled to receive upon the happening of the applicable corporate event had the Preferred Warrant been exercised immediately prior
to the applicable corporate event.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In the three-month period ended September 30,
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&#8217;s Preferred Warrants are exercisable
into Series A Preferred Stock, which has no cash redemption features that require liability treatment. The Company has recorded the Preferred
Warrants as equity.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


</div><!-- Field: Page; Sequence: 222; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->22<!-- Field: /Sequence --></span></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:FairValueDisclosuresTextBlock" id="ixv-26413"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.7pt; text-align: justify; text-indent: -49.7pt"><span style="text-transform: uppercase"><b>NOTE
9 &#8211; FAIR VALUE MEASUREMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.7pt; text-align: justify; text-indent: -49.7pt"><span style="text-transform: uppercase"><b>&#160;</b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<ix:continuation id="_FairValueAssetsAndLiabilitiesMeasuredOnRecurringAndNonrecurringBasisValuationTechniquesTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-transform: uppercase"><b>&#160;</b></span></p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At September 30, 2024 for the Successor and December&#160;31,
2023 for the Predecessor, the fair value of derivative liabilities were classified as follows:</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="cero_ScheduleOfChangeInTheFairValueMeasurementUsingSignificantInputsTableTextBlock-c0_cont_1" escape="true" name="cero:ScheduleOfChangeInTheFairValueMeasurementUsingSignificantInputsTableTextBlock" id="ixv-35642">The classification of the fair value of derivative
liabilities and the change in the fair value measurement using significant inputs (Level&#160;3) for the period from December 31, 2022
through September 30, 2023 and December 31, 2023 through February 14, 2024 for Predecessor and February 14, 2024 through September 30,
2024 for the Company is presented below:</ix:nonNumeric></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>&#160;</b></span></p>

<ix:continuation continuedAt="cero_ScheduleOfChangeInTheFairValueMeasurementUsingSignificantInputsTableTextBlock-c0_cont_2" id="cero_ScheduleOfChangeInTheFairValueMeasurementUsingSignificantInputsTableTextBlock-c0_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td colspan="2" style="text-align: center; border-bottom: Black 1.5pt solid">Total</td><td style="padding-bottom: 1.5pt">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="font-weight: bold">Preferred stock warrant liability (Predecessor):</td><td>&#160;</td>
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    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 52%">Balance at January 1, 2024</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Balance at February 13, 2024</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-271">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-272">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-273">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-274">-</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Balance at February 14, 2024</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-275">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-276">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c330" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:FairValueNetAssetLiability" scale="0" unitRef="usd" id="ixv-35647">4,900,000</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c104" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:FairValueNetAssetLiability" scale="0" unitRef="usd" id="ixv-35648">4,900,000</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-277">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-278">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Balance at March 31, 2024</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-279">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-280">-</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c337" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:FairValueNetAssetLiability" scale="0" unitRef="usd" id="ixv-35651">3,100,000</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt; padding-left: 9pt">(Gain) on revaluation of earnout liability</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-281">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-282">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c341" decimals="0" format="ixt:num-dot-decimal" name="cero:GainlossOnRevaluationOfWarrantLiability" scale="0" sign="-" unitRef="usd" id="ixv-35653">2,900,000</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Balance at June 30, 2024</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt; padding-left: 0.125in">(Gain) on revaluation of earnout liability</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-285">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-286">-</div></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt">Balance at September 30, 2024</td><td style="padding-bottom: 4pt">&#160;</td>
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    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><div style="-sec-ix-hidden: hidden-fact-288">-</div></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c352" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:FairValueNetAssetLiability" scale="0" unitRef="usd" id="ixv-35659">30,000</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c217" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:FairValueNetAssetLiability" scale="0" unitRef="usd" id="ixv-35660">30,000</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td></tr>
  </table></ix:continuation>


<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>&#160;</b></span></p>

<ix:continuation id="cero_ScheduleOfChangeInTheFairValueMeasurementUsingSignificantInputsTableTextBlock-c0_cont_2"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td>Balance at June 30, 2023</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 1.5pt; padding-left: 9pt">Gain on revaluation of warrant liability</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 4pt">Balance at September 30, 2023</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><div style="-sec-ix-hidden: hidden-fact-301">-</div></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><div style="-sec-ix-hidden: hidden-fact-302">-</div></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td><td style="padding-bottom: 4pt">&#160;</td>
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  </table></ix:continuation></ix:nonNumeric><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>&#160;</b></span></p><div>


</div><!-- Field: Page; Sequence: 223; Value: 1 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->23<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" continuedAt="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_1" escape="true" name="us-gaap:DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock" id="ixv-27017"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.7pt; text-align: justify; text-indent: -49.7pt"><span style="text-transform: uppercase"><b>NOTE
10 &#8211; STOCK-BASED COMPENSATION</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In October 2016, Predecessor&#8217;s Board of
Directors approved the adoption of an Equity Incentive Plan (&#8220;Predecessor EIP&#8221;). As amended, the Predecessor EIP permits Predecessor
to grant awards allowing for the issuance of up to <ix:nonFraction contextRef="c380" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardNumberOfSharesAvailableForGrant" scale="0" unitRef="shares" id="ixv-35675">4,888,402</ix:nonFraction> shares of Predecessor&#8217;s common stock. On close of the Merger, outstanding
awards issued for the Predecessor EIP were converted to options to purchase a number of shares of the Company&#8217;s Common Stock equal
to the number of Predecessor shares multiplied by the Merger conversion ratio of <ix:nonFraction contextRef="c381" decimals="8" format="ixt:num-dot-decimal" name="cero:FairValueOfTheCompanysCommonStockAtTheDateOfGrant" scale="-2" unitRef="pure" id="ixv-35676">0.064452</ix:nonFraction> at a price of the Predecessor option strike
price divided by the Merger conversion ratio. The Predecessor EIP was then cancelled.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><ix:nonNumeric contextRef="c0" continuedAt="_ScheduleOfShareBasedCompensationStockOptionsActivityTableTextBlock-c0_cont_1" escape="true" name="us-gaap:ScheduleOfShareBasedCompensationStockOptionsActivityTableTextBlock" id="ixv-35677">Predecessor&#8217;s Stock option activity for
the period from December 31, 2023 through February 14, 2024 and the Company&#8217;s stock option activity for the period from February
14, 2024 through September 30, 2024, was as follows:</ix:nonNumeric></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The intrinsic value of Predecessor options exercised
during the nine-month period ended September 30, 2023 was $<ix:nonFraction contextRef="c379" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SharebasedCompensationArrangementBySharebasedPaymentAwardOptionsExercisableIntrinsicValue1" scale="0" unitRef="usd" id="ixv-35690">9,485</ix:nonFraction>. No options were exercised in the nine-month period ended September 30,
2024.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On March 25, 2024, the Company&#8217;s Board adopted,
and its stockholders approved, an Equity Incentive Plan (the &#8220;2024 Plan&#8221;). The 2024 Plan provides for the granting of stock
options, restricted stock and stock appreciation rights to employees, members of the Board of Directors and non-employee consultants.
Stock options granted generally expire&#160;<ix:nonNumeric contextRef="c382" format="ixt-sec:durwordsen" name="us-gaap:SharebasedCompensationArrangementBySharebasedPaymentAwardExpirationPeriod" id="ixv-35691">ten years</ix:nonNumeric>&#160;after their original date of grant and generally vest <ix:nonFraction contextRef="c383" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:SharebasedCompensationArrangementBySharebasedPaymentAwardAwardVestingRightsPercentage" scale="-2" unitRef="pure" id="ixv-35692">25</ix:nonFraction>% on the first anniversary
of the grant, then monthly to the fourth anniversary of the date of grant, subject to continued service through the applicable vesting
date. The plan allows for the issuance of up to <ix:nonFraction contextRef="c384" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockCapitalSharesReservedForFutureIssuance" scale="0" unitRef="shares" id="ixv-35693">5,172,590</ix:nonFraction>&#160;shares of Common Stock. On April 30, 2024, the 2024 Plan was amended to
include <ix:nonFraction contextRef="c385" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:StockholdersEquityOtherShares" scale="0" unitRef="shares" id="ixv-35694">2,000,000</ix:nonFraction> additional shares of Common Stock in the pool available for future grant awards.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company estimated the fair value of stock
options granted during the period February 14, 2024 through September 30, 2024 using Black-Scholes with the following weighted average
assumptions:</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
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</tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
risk-free interest rate assumption is based on the U.S. Department of Treasury instruments whose term was most consistent with the expected
life of the Company&#8217;s stock options.</span></td>
</tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
expected stock price volatility assumption was determined by examining the historical volatilities for industry peers, as the Company
does not have sufficient public trading history for the Company&#8217;s Common Stock. The Company will continue to analyze the historical
stock price volatility and expected term assumption as more historical price data for the Company&#8217;s Common Stock becomes available.</span></td>
</tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The
expected lives of the Company&#8217;s stock options are estimated based on the type of award issued using approaches that do not rely
on the historical data of the Company, as management has concluded there is insufficient data to provide a reasonable forward-looking
estimate. The expected life of an incentive stock option is estimated using the simplified method described in Staff Accounting Bulletin
Topic 14 &#8211; Share-Based Payment. All incentive stock options awarded by the Company have terms consistent with this approach, which
is to calculate the weighted average midpoint between the vesting date of each vesting tranche and the termination date of the option.
Non-qualified stock options are valued using the contractual life as the expected term.</span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p></ix:nonNumeric><div>
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</div><!-- Field: Split-Segment; Name: 4 --><div>
</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><ix:continuation id="_DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-c0_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the period from February 14, 2024 through
September 30, 2024, the Company recorded stock-based compensation expense of $<ix:nonFraction contextRef="c0" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:AllocatedShareBasedCompensationExpense" scale="6" unitRef="usd" id="ixv-35696">1.9</ix:nonFraction> million, of which $<ix:nonFraction contextRef="c387" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:OtherResearchAndDevelopmentExpense" scale="6" unitRef="usd" id="ixv-35697">1.0</ix:nonFraction> million was related to research
and development and $<ix:nonFraction contextRef="c388" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:OtherResearchAndDevelopmentExpense" scale="6" unitRef="usd" id="ixv-35698">0.9</ix:nonFraction> million was related to general and administrative. For the period from January 1, 2024 through February 13, 2024,
Predecessor recorded an immaterial amount of stock-based compensation expense. For the three-month period ended September 30, 2024, the
Company recorded stock-based compensation expense of $<ix:nonFraction contextRef="c294" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:AllocatedShareBasedCompensationExpense" scale="6" unitRef="usd" id="ixv-35699">0.4</ix:nonFraction> million, of which $<ix:nonFraction contextRef="c294" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:OtherResearchAndDevelopmentExpense" scale="6" unitRef="usd" id="ixv-35700">0.1</ix:nonFraction> million was related to research and development and $<ix:nonFraction contextRef="c294" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:OtherGeneralAndAdministrativeExpense" scale="6" unitRef="usd" id="ixv-35701">0.3</ix:nonFraction>
million was related to general and administrative.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the nine-month period ended September 30,
2023, Predecessor recorded stock-based compensation expense of $<ix:nonFraction contextRef="c389" decimals="-4" format="ixt:num-dot-decimal" name="us-gaap:AllocatedShareBasedCompensationExpense" scale="6" unitRef="usd" id="ixv-35702">0.08</ix:nonFraction> million, of which $<ix:nonFraction contextRef="c390" decimals="-4" format="ixt:num-dot-decimal" name="us-gaap:OtherGeneralAndAdministrativeExpense" scale="6" unitRef="usd" id="ixv-35703">0.07</ix:nonFraction> million was related to research and development
and $<ix:nonFraction contextRef="c391" decimals="-4" format="ixt:num-dot-decimal" name="us-gaap:OtherGeneralAndAdministrativeExpense" scale="6" unitRef="usd" id="ixv-35704">0.01</ix:nonFraction> million was related to general and administrative. For the three-month period ended September 30, 2023, the Predecessor recorded
stock-based compensation expense of $<ix:nonFraction contextRef="c375" decimals="-4" format="ixt:num-dot-decimal" name="us-gaap:AllocatedShareBasedCompensationExpense" scale="6" unitRef="usd" id="ixv-35705">0.02</ix:nonFraction> million, of which $<ix:nonFraction contextRef="c392" decimals="-4" format="ixt:num-dot-decimal" name="us-gaap:AllocatedShareBasedCompensationExpense" scale="6" unitRef="usd" id="ixv-35706">0.02</ix:nonFraction> million was related to research and development and approximately $<ix:nonFraction contextRef="c393" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:OtherGeneralAndAdministrativeExpense" scale="6" unitRef="usd" id="ixv-35707">0</ix:nonFraction>
was related to general and administrative.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of September 30, 2024, the Company had $<ix:nonFraction contextRef="c217" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:UnamortizedDebtIssuanceExpense" scale="6" unitRef="usd" id="ixv-35708">1.5</ix:nonFraction>
million of unamortized stock-based compensation cost related to unvested stock options, which is expected to be recognized over a weighted
average period of <ix:nonNumeric contextRef="c0" format="ixt-sec:duryear" name="us-gaap:EmployeeServiceShareBasedCompensationNonvestedAwardsTotalCompensationCostNotYetRecognizedPeriodForRecognition1" id="ixv-35709">1.7</ix:nonNumeric> years. The weighted average grant date calculated fair value per share of the Company&#8217;s options granted during
the period from February 14, 2024, through September 30, 2024, was $<ix:nonFraction contextRef="c0" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsGrantsInPeriodWeightedAverageGrantDateFairValue" scale="0" unitRef="usdPershares" id="ixv-35710">1.02</ix:nonFraction>.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">There were no Predecessor options granted in the
nine-month period ended September 30, 2023.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.7pt; text-align: justify; text-indent: -49.7pt"><span style="text-transform: uppercase"><b>&#160;</b></span></p><div>

</div><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:PensionAndOtherPostretirementBenefitsDisclosureTextBlock" id="ixv-27235"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.7pt; text-align: justify; text-indent: -49.7pt"><span style="text-transform: uppercase"><b>NOTE
11 &#8211; 401(k) RETIREMENT SAVINGS PLAN</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company sponsors a 401(k) defined contribution
plan covering eligible employees who elect to participate. The Company is allowed to make discretionary profit sharing and 401(k) matching
contributions as defined in the plan and as approved by the Board of Directors. The Company&#8217;s contributions for the period from
February 14, 2024 through September 30, 2024, was $<ix:nonFraction contextRef="c396" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:EmployeeStockOwnershipPlanESOPCashContributionsToESOP" scale="0" unitRef="usd" id="ixv-35711">40,459</ix:nonFraction> and Predecessor contributions during the period from January 1, 2024 through
February 13, 2024 was $<ix:nonFraction contextRef="c397" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:EmployeeStockOwnershipPlanESOPCashContributionsToESOP" scale="0" unitRef="usd" id="ixv-35712">8,657</ix:nonFraction>. The Company&#8217;s contributions for the three-months ended September 30, 2024 was $<ix:nonFraction contextRef="c294" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:EmployeeStockOwnershipPlanESOPCashContributionsToESOP" scale="0" unitRef="usd" id="ixv-35713">16,700</ix:nonFraction>. The Predecessor
made <span style="-sec-ix-hidden: hidden-fact-309"><span style="-sec-ix-hidden: hidden-fact-310">no</span></span> contributions in the three- or nine-months ended September 30, 2023.</p></ix:nonNumeric><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c0" escape="true" name="us-gaap:SubsequentEventsTextBlock" id="ixv-27246"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.7pt; text-align: justify; text-indent: -49.7pt"><span style="text-transform: uppercase"><b>NOTE
12 &#8211; Subsequent Events</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On October 1, 2024, the Company&#8217;s Board
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have various vesting conditions, including time-based and performance-based terms. Additionally, on October 1, 2024, the exercise price
of all other outstanding options granted under the 2024 Plan was adjusted to $<ix:nonFraction contextRef="c402" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:SharesIssuedPricePerShare" scale="0" unitRef="usdPershares" id="ixv-35716">0.10</ix:nonFraction> per share, with all other terms of the original grant
to remain without adjustment.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On October 23, 2024, the trading price for CERo
common stock closed under $<ix:nonFraction contextRef="c403" decimals="2" format="ixt:num-dot-decimal" name="cero:TradingPrice" scale="0" unitRef="usdPershares" id="ixv-35717">0.10</ix:nonFraction> and was the tenth consecutive trading day to do so. On October 24, 2024, the Company received letter from
the staff at The Nasdaq Global Market (&#8220;Nasdaq&#8221;) notifying the Company that, because its Common Stock had a closing bid price
of $<ix:nonFraction contextRef="c404" decimals="2" format="ixt:num-dot-decimal" name="cero:ClosingBidPricePerShare" scale="0" unitRef="usdPershares" id="ixv-35718">0.10</ix:nonFraction> or less for <ix:nonFraction contextRef="c405" decimals="0" format="ixt-sec:numwordsen" name="cero:ConsecutiveTradingDays" scale="0" unitRef="pure" id="ixv-35719">ten</ix:nonFraction> consecutive trading days, it was no longer eligible to rely upon the 180-day cure period that commenced when
the Company received notice in July 2024 that the closing bid price was below $<ix:nonFraction contextRef="c406" decimals="2" format="ixt:num-dot-decimal" name="cero:TradingPrice" scale="0" unitRef="usdPershares" id="ixv-35720">1.00</ix:nonFraction> for <ix:nonFraction contextRef="c406" decimals="0" format="ixt-sec:numwordsen" name="cero:ConsecutiveTradingDays" scale="0" unitRef="pure" id="ixv-35721">ten</ix:nonFraction> consecutive trading days and was scheduled
to expire on <ix:nonNumeric contextRef="c406" format="ixt:date-monthname-day-year-en" name="cero:ExpireDate" id="ixv-35722">January 15, 2025</ix:nonNumeric>. In addition, on October 30, 2024, the Company received a letter from the staff at Nasdaq notifying the
Company that it had not regained compliance with the continued listing requirement to maintain a minimum market value of $<ix:nonFraction contextRef="c407" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:EquityMethodInvestmentQuotedMarketValue" scale="0" unitRef="usd" id="ixv-35723">50,000,000</ix:nonFraction> for
its listed securities within the 180-day compliance period granted by Nasdaq in May 2024. Each such deficiency results in the commencement
of delisting proceedings. However, the Company has requested a hearing from Nasdaq and plans to submit a plan to regain compliance with
the listing requirements at such hearing.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On November 8, 2024, the Company consummated a
purchase agreement with Keystone pursuant to which we may sell and issue, and Keystone is obligated to purchase, up to $<ix:nonFraction contextRef="c408" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:PurchaseObligation" scale="6" unitRef="usd" id="ixv-35724">20.6</ix:nonFraction> million of
shares of Common Stock, subject to certain market conditions. The price of the shares purchased by Keystone under the ELOC is <ix:nonFraction contextRef="c409" decimals="2" format="ixt:num-dot-decimal" name="cero:PercentageOfVolumeWeightedAveragePrice" scale="-2" unitRef="pure" id="ixv-35725">90</ix:nonFraction>% of various
volume-weighted average price (&#8220;VWAP&#8221;) and closing price-based formulae, and requires a waiver, should the selling price be
below $<ix:nonFraction contextRef="c408" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:SaleOfStockPricePerShare" scale="0" unitRef="usdPershares" id="ixv-35726">0.01</ix:nonFraction> per share.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On November 11. 2024, the Company&#8217;s stockholders
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ratio of <ix:nonNumeric contextRef="c412" name="us-gaap:StockholdersEquityReverseStockSplit" id="ixv-35729">1:40</ix:nonNumeric>, such reverse split is anticipated to be effective on or about December 2, 2024. Although such reverse stock split is expected
to enable regaining compliance with the Bid Price Requirement, it is not intended to contribute to regaining compliance with the other
Requirements.</p></ix:nonNumeric><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


</div><!-- Field: Page; Sequence: 225; Value: 24 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->25<!-- Field: /Sequence --></span></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="f_006"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">To the Stockholders and Board of Directors of
Phoenix Biotech Acquisition Corp.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Opinion on the Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have audited the accompanying balance sheets
of Phoenix Biotech Acquisition Corp. (the &#8220;Company&#8221;) as of December 31, 2023 and 2022, and the related statements of operations,
changes in stockholders&#8217; deficit and cash flows for each of the years in the two-year period ended December 31, 2023, and the related
notes (collectively, the &#8220;financial statements&#8221;). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows
for each of the years in the two-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the
United States of America.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Substantial Doubt About the Company&#8217;s
Ability to Continue as a Going Concern</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accompanying financial statements have been
prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company&#8217;s
expected working capital needs to fund its combined operations and meet obligations as a result of the acquisition of CERo Therapeutics,
Inc. in February 2024, raise substantial doubt about its ability to continue as a going concern. The Company&#8217;s continued operations
are dependent upon its ability to raise additional funds through debt or equity financing. There can be no assurances that the Company
will be able to secure any such additional financing on acceptable terms and conditions, or at all. Management&#8217;s plan in regard
to these matters is described in Note 1. The financial statements do not include any adjustments that might result from the outcome of
this uncertainty.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Basis for Opinion</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">These financial statements are the responsibility
of the Company&#8217;s management. Our responsibility is to express an opinion on the Company&#8217;s financial statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (&#8220;PCAOB&#8221;)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company&#8217;s
internal control over financial reporting. Accordingly, we express no such opinion.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Our audits included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">/s/ Citrin Cooperman &amp; Company, LLP</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have served as the Company&#8217;s auditor
since 2021.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">New York, New York</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">April 2, 2024</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><div><a id="f_007"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PHOENIX BIOTECH ACQUISITION CORP.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>BALANCE SHEETS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2023</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: center">&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; text-align: center">ASSETS</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; text-align: left">CURRENT ASSETS</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.25in; width: 76%">Cash</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; text-align: left">LIABILITIES, REDEEMABLE COMMON STOCK, AND STOCKHOLDERS&#8217; DEFICIT</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; text-align: left">CURRENT LIABILITIES</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.25in; text-align: left">Accounts payable and accrued expenses</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction contextRef="c15" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AccountsPayableAndAccruedLiabilitiesCurrent" scale="0" unitRef="usd" id="ixv-35738">3,535,084</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">$</td><td style="text-align: right"><ix:nonFraction contextRef="c16" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AccountsPayableAndAccruedLiabilitiesCurrent" scale="0" unitRef="usd" id="ixv-35739">1,653,120</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.25in; text-align: left">Income tax payable</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c15" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:TaxesPayableCurrent" scale="0" unitRef="usd" id="ixv-35740">23,633</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.25in; text-align: left">Shareholder redemption liability</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-19">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c16" decimals="0" format="ixt:num-dot-decimal" name="cero:ShareholderRedemptionLiability" scale="0" unitRef="usd" id="ixv-35742">27,842,747</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.25in; text-align: left">Working capital loan&#160;&#8211;&#160;related party</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c17" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NotesPayableCurrent" scale="0" unitRef="usd" id="ixv-35743">1,555,000</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.25in; text-align: left">Excise tax payable</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-20">&#8212;</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.25in; text-align: left; padding-bottom: 1.5pt">Due to Affiliate</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.375in; font-weight: bold; text-align: left">Total current liabilities</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; text-align: left">LONG TERM LIABILITIES</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left; padding-bottom: 1.5pt">Deferred underwriting fee payable</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; text-align: left">COMMITMENTS AND CONTINGENCIES</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; text-align: left">REDEEMABLE COMMON STOCK</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; text-align: left">STOCKHOLDERS&#8217; DEFICIT</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-23">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-24">&#8212;</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c19" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockValue" scale="0" unitRef="usd" id="ixv-35774">547</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.25in; text-align: left">Class&#160;B common stock; $<ix:nonFraction contextRef="c21" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:CommonStockParOrStatedValuePerShare" scale="0" unitRef="usdPershares" id="ixv-35776"><ix:nonFraction contextRef="c22" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:CommonStockParOrStatedValuePerShare" scale="0" unitRef="usdPershares" id="ixv-35777">0.0001</ix:nonFraction></ix:nonFraction> par value; <ix:nonFraction contextRef="c21" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesAuthorized" scale="0" unitRef="shares" id="ixv-35778"><ix:nonFraction contextRef="c22" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesAuthorized" scale="0" unitRef="shares" id="ixv-35779">10,000,000</ix:nonFraction></ix:nonFraction> shares authorized; <ix:nonFraction contextRef="c21" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesIssued" scale="0" unitRef="shares" id="ixv-35780"><ix:nonFraction contextRef="c21" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesOutstanding" scale="0" unitRef="shares" id="ixv-35781">0</ix:nonFraction></ix:nonFraction> and <ix:nonFraction contextRef="c22" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesIssued" scale="0" unitRef="shares" id="ixv-35782"><ix:nonFraction contextRef="c22" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesOutstanding" scale="0" unitRef="shares" id="ixv-35783">4,596,250</ix:nonFraction></ix:nonFraction> shares issued and outstanding as of December&#160;31, 2023 and 2022, respectively</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-29">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c22" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockValue" scale="0" unitRef="usd" id="ixv-35784">459</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.25in; text-align: left">Additional paid-in capital</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-30">&#8212;</div></td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-31">&#8212;</div></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.25in; text-align: left; padding-bottom: 1.5pt">Accumulated deficit</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c15" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RetainedEarningsAccumulatedDeficit" scale="0" sign="-" unitRef="usd" id="ixv-35785">14,199,669</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c16" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RetainedEarningsAccumulatedDeficit" scale="0" sign="-" unitRef="usd" id="ixv-35786">11,000,701</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-indent: -0.125in; font-weight: bold; text-align: left; padding-bottom: 1.5pt">Total stockholders&#8217; deficit</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c15" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:StockholdersEquity" scale="0" sign="-" unitRef="usd" id="ixv-35787">14,199,122</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; text-align: left; padding-bottom: 4pt">TOTAL LIABILITIES, REDEEMABLE COMMON STOCK, AND STOCKHOLDERS&#8217; DEFICIT</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c15" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:LiabilitiesAndStockholdersEquity" scale="0" unitRef="usd" id="ixv-35789">8,560,610</ix:nonFraction></td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c16" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:LiabilitiesAndStockholdersEquity" scale="0" unitRef="usd" id="ixv-35790">42,367,032</ix:nonFraction></td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td></tr>
  </table><div>



</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><i>The accompanying notes are an integral part
of the financial statements.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


</div><!-- Field: Page; Sequence: 227; Value: 24 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->27<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><div><a id="f_008"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PHOENIX BIOTECH ACQUISITION CORP.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>STATEMENTS OF OPERATIONS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: center">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="border-bottom: Black 1.5pt solid; text-align: center"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the Year Ended</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>December 31,</b></p></td><td style="padding-bottom: 1.5pt">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2023</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold">OPERATING EXPENSES</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c34" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:GeneralAndAdministrativeExpense" scale="0" unitRef="usd" id="ixv-35791">2,892,935</ix:nonFraction></td><td style="width: 1%; text-align: left">&#160;</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c34" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:FranchisorCosts" scale="0" unitRef="usd" id="ixv-35793">40,050</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c35" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:FranchisorCosts" scale="0" unitRef="usd" id="ixv-35794">64,050</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.25in; font-weight: bold; text-align: left; padding-bottom: 1.5pt">Loss from operations</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c34" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingIncomeLoss" scale="0" sign="-" unitRef="usd" id="ixv-35795">2,932,985</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; text-align: left; padding-bottom: 4pt">Basic and diluted net loss per share, Class&#160;B common stock</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
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  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><i>The accompanying notes are an integral part
of the financial statements.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


</div><!-- Field: Page; Sequence: 228; Value: 24 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->28<!-- Field: /Sequence --></span></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><div><a id="f_009"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PHOENIX BIOTECH ACQUISITION CORP.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>STATEMENTS OF CHANGES IN STOCKHOLDERS&#8217;
DEFICIT</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>FOR THE YEAR ENDED DECEMBER 31, 2023 AND 2022</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold">&#160;</td>
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    <td colspan="2" style="text-align: center">&#160;</td><td>&#160;</td><td style="font-weight: bold">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center">Total</td><td style="font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold">&#160;</td>
    <td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Class&#160;A</td><td style="font-weight: bold">&#160;</td><td style="font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="width: 1%; font-weight: bold; text-align: left">$</td><td style="width: 6%; font-weight: bold; text-align: right">&#160;&#160;&#160;&#160;&#160;&#160;<ix:nonFraction contextRef="c153" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:StockholdersEquity" scale="0" unitRef="usd" id="ixv-35822">459</ix:nonFraction></td><td style="width: 1%; font-weight: bold; text-align: left">&#160;</td><td style="width: 1%; font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><i>The accompanying notes are an integral part
of the financial statements.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><div><a id="f_010"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PHOENIX BIOTECH ACQUISITION CORP.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>STATEMENTS OF CASH FLOWS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.5in; text-align: left">Interest income earned on marketable securities held in Trust Account</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.5in; text-align: left; padding-bottom: 1.5pt">Franchise tax payable</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c35" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:IncreaseDecreaseInPropertyAndOtherTaxesPayable" scale="0" sign="-" unitRef="usd" id="ixv-35859">80,324</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.5in; text-indent: -0.125in; font-weight: bold; text-align: left; padding-bottom: 1.5pt">Net cash used in operating activities</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; text-align: left">CASH FLOWS FROM INVESTING ACTIVITIES</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.25in; text-align: left">Cash withdrawn from Trust Account for taxes</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c34" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromSaleOfRestrictedInvestments" scale="0" unitRef="usd" id="ixv-35862">752,300</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.25in; text-align: left">Investment of restricted cash into marketable securities in the Trust Account</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c34" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PaymentsToAcquireTrustPreferredInvestments" scale="0" unitRef="usd" id="ixv-35864">14,335,919</ix:nonFraction></td><td style="text-align: left">)</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">(<ix:nonFraction contextRef="c35" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PaymentsToAcquireTrustPreferredInvestments" scale="0" unitRef="usd" id="ixv-35865">325,000</ix:nonFraction></td><td style="text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-indent: -0.125in; padding-left: 0.25in; text-align: left; padding-bottom: 1.5pt">Cash withdrawn from Trust Account in connection with Class A common stock redemption</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c34" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromSaleAndMaturityOfOtherInvestments" scale="0" unitRef="usd" id="ixv-35866">5,638,879</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c35" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromSaleAndMaturityOfOtherInvestments" scale="0" unitRef="usd" id="ixv-35867">181,019,852</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-indent: -0.125in; padding-left: 0.5in; font-weight: bold; text-align: left; padding-bottom: 1.5pt">Net cash provided by investing activities</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c35" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NetCashProvidedByUsedInInvestingActivities" scale="0" unitRef="usd" id="ixv-35869">180,839,396</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; text-align: left">CASH FLOWS FROM FINANCING ACTIVITIES:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.25in; text-indent: -0.125in; text-align: left">Proceeds from promissory note - related party</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c34" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromRelatedPartyDebt" scale="0" unitRef="usd" id="ixv-35870">905,000</ix:nonFraction></td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.25in; text-indent: -0.125in; text-align: left; padding-bottom: 1.5pt">Redemption of Class A common stock</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c34" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PaymentsForRepurchaseOfCommonStock" scale="0" unitRef="usd" id="ixv-35872">33,481,627</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c35" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PaymentsForRepurchaseOfCommonStock" scale="0" unitRef="usd" id="ixv-35873">139,353,878</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c34" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NetCashProvidedByUsedInFinancingActivities" scale="0" sign="-" unitRef="usd" id="ixv-35874">32,576,627</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: right">(<ix:nonFraction contextRef="c35" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NetCashProvidedByUsedInFinancingActivities" scale="0" sign="-" unitRef="usd" id="ixv-35875">138,703,878</ix:nonFraction></td><td style="padding-bottom: 1.5pt; font-weight: bold; text-align: left">)</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; text-align: left; padding-bottom: 1.5pt">CASH AND RESTRICTED CASH, BEGINNING OF PERIOD</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c16" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents" scale="0" unitRef="usd" id="ixv-35878">42,141,844</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c156" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents" scale="0" unitRef="usd" id="ixv-35879">1,098,573</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-left: 0.125in; text-indent: -0.125in; font-weight: bold; text-align: left; padding-bottom: 4pt">CASH AND RESTRICTED CASH, END OF PERIOD</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; font-weight: bold; text-align: left">$</td><td style="border-bottom: Black 4pt double; font-weight: bold; text-align: right"><ix:nonFraction contextRef="c15" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CashCashEquivalentsRestrictedCashAndRestrictedCashEquivalents" scale="0" unitRef="usd" id="ixv-35880">96,873</ix:nonFraction></td><td style="padding-bottom: 4pt; font-weight: bold; text-align: left">&#160;</td><td style="font-weight: bold; padding-bottom: 4pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="padding-left: 0.125in; text-indent: -0.125in; text-align: left; padding-bottom: 4pt">Excise tax liability accrued for Class A common stock redemptions</td><td style="padding-bottom: 4pt">&#160;</td>
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    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><div style="-sec-ix-hidden: hidden-fact-199">&#8212;</div></td><td style="padding-bottom: 2.5pt; text-align: left">&#160;</td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><i>The accompanying notes are an integral part
of the financial statements.</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><div><a id="f_011"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PHOENIX BIOTECH ACQUISITION CORP.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>DECEMBER 31, 2023</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c413" continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c413_cont_1" escape="true" name="us-gaap:OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock" id="ixv-28747"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Note 1 &#8212; Description of Organization and Business Operations
and Liquidity</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">Phoenix Biotech Acquisition
Corp. (the &#8220;Company&#8221;) was incorporated in Delaware on June 8, 2021. The Company was formed for the purpose of effecting a
merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses
(a &#8220;business combination&#8221;).</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">The Company is not limited
to a particular industry or geographic region for purposes of consummating a business combination. The Company is an early stage and emerging
growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">As of December 31, 2023,
the Company had not commenced any operations. All activity through December 31, 2023 relates to the Company&#8217;s formation and initial
public offering (&#8220;IPO&#8221;), which is described below and, since the offering, the search for a prospective initial business combination.
The Company will not generate any operating revenues until after the completion of its initial business combination, at the earliest.
The Company generates non-operating income in the form of interest income earned on investments from the proceeds derived from the IPO
and placed in the Trust Account (defined below). The registration statement for the Company&#8217;s IPO was declared effective on October
5, 2021. On October 8, 2021, the Company consummated the IPO of <ix:nonFraction contextRef="c414" decimals="INF" format="ixt:num-dot-decimal" name="cero:UnitsIssuedDuringPeriodSharesNewIssues" scale="0" unitRef="shares" id="ixv-35888">15,500,000</ix:nonFraction> units (&#8220;Units&#8221;) (with respect to the Class A common
stock included in the Units being offered (the &#8220;Public Shares&#8221;)) at $<ix:nonFraction contextRef="c415" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:SharesIssuedPricePerShare" scale="0" unitRef="usdPershares" id="ixv-35889">10.00</ix:nonFraction> per Unit generating gross proceeds of $<ix:nonFraction contextRef="c414" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromIssuanceInitialPublicOffering" scale="0" unitRef="usd" id="ixv-35890">155,000,000</ix:nonFraction>,
which is discussed in Note 3. The Company has selected December 31 as its fiscal year end.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">Simultaneously with the closing
of the IPO, the Company consummated the sale of <ix:nonFraction contextRef="c416" decimals="0" format="ixt:num-dot-decimal" name="cero:UnitsIssuedDuringPeriodSharesNewIssues" scale="0" unitRef="shares" id="ixv-35891">845,000</ix:nonFraction> units (&#8220;Private Placement Units&#8221;) (with respect to the Class A common
stock included in the Private Placement Units offered, the &#8220;Private Placement Shares&#8221;) at a price of $<ix:nonFraction contextRef="c417" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:SharesIssuedPricePerShare" scale="0" unitRef="usdPershares" id="ixv-35892">10.00</ix:nonFraction> per Private Placement
Unit in a private placement to the Company&#8217;s sponsor, Phoenix Biotech Sponsor, LLC (the &#8220;Sponsor&#8221;), Cantor Fitzgerald
&amp; Co. (&#8220;Cantor&#8221;) and Cohen &amp; Company Capital Markets, a division of J.V.B. Financial Group, LLC (&#8220;CCM&#8221;),
generating gross proceeds of $<ix:nonFraction contextRef="c413" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromIssuanceOfPrivatePlacement" scale="0" unitRef="usd" id="ixv-35893">8,450,000</ix:nonFraction>, which is described in Note 4.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">Simultaneously with the closing
of the IPO, the Company consummated the sale of <ix:nonFraction contextRef="c418" decimals="INF" format="ixt:num-dot-decimal" name="cero:UnitsIssuedDuringPeriodSharesNewIssues" scale="0" unitRef="shares" id="ixv-35894">2,000,000</ix:nonFraction> additional Units upon receiving notice of the underwriter&#8217;s election to
partially exercise its overallotment option (&#8220;Overallotment Units&#8221;), generating additional gross proceeds of $<ix:nonFraction contextRef="c418" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromIssuanceOfPrivatePlacement" scale="0" unitRef="usd" id="ixv-35895">20,000,000</ix:nonFraction> and
incurring additional offering costs of $<ix:nonFraction contextRef="c418" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ExpenseRelatedToDistributionOrServicingAndUnderwritingFees" scale="0" unitRef="usd" id="ixv-35896">1,400,000</ix:nonFraction> in underwriting fees, all of which are deferred until the completion of the Company&#8217;s
initial business combination. Simultaneously with the exercise of the overallotment, the Company consummated the Private Placement of
an additional <ix:nonFraction contextRef="c419" decimals="0" format="ixt:num-dot-decimal" name="cero:AdditionalUnitsIssuedDuringPeriodSharesNewIssues" scale="0" unitRef="shares" id="ixv-35897">40,000</ix:nonFraction> Private Placement Units to the Sponsor and CCM, generating gross proceeds of $<ix:nonFraction contextRef="c419" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromIssuanceOfPrivatePlacement" scale="0" unitRef="usd" id="ixv-35898">400,000</ix:nonFraction>.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">Offering costs for the IPO
and exercise of the overallotment option amounted to $<ix:nonFraction contextRef="c420" decimals="0" format="ixt:num-dot-decimal" name="cero:OfferingCosts" scale="0" unitRef="usd" id="ixv-35899">12,729,318</ix:nonFraction>, consisting of $<ix:nonFraction contextRef="c420" decimals="0" format="ixt:num-dot-decimal" name="cero:UnderwritingFees" scale="0" unitRef="usd" id="ixv-35900">2,635,000</ix:nonFraction> of underwriting fees, $<ix:nonFraction contextRef="c421" decimals="0" format="ixt:num-dot-decimal" name="cero:DeferredUnderwritingCommissionsIncludingFees" scale="0" unitRef="usd" id="ixv-35901">9,150,000</ix:nonFraction> of deferred
underwriting fees payable (which are held in the Trust Account (defined below)) and $<ix:nonFraction contextRef="c420" decimals="0" format="ixt:num-dot-decimal" name="cero:OtherOfferingCosts" scale="0" unitRef="usd" id="ixv-35902">944,318</ix:nonFraction> of other costs. As described in Note 6, the
$<ix:nonFraction contextRef="c413" decimals="0" format="ixt:num-dot-decimal" name="cero:DeferredUnderwritingFees" scale="0" unitRef="usd" id="ixv-35903">9,150,000</ix:nonFraction> of deferred underwriting fees payable is contingent upon the consummation of a business combination by January 8, 2024, subject
to the terms of the underwriting agreement.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">Following the closing of
the IPO, $<ix:nonFraction contextRef="c413" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PaymentsToAcquireMarketableSecurities" scale="0" unitRef="usd" id="ixv-35904">178,500,000</ix:nonFraction> ($<ix:nonFraction contextRef="c422" decimals="2" format="ixt:num-dot-decimal" name="cero:CashDepositedInTrustAccountPerUnit" scale="0" unitRef="usdPershares" id="ixv-35905">10.20</ix:nonFraction> per Unit) from the net proceeds of the sale of the Units in the IPO, the Overallotment Units and the Private
Placement Units was placed in a trust account (&#8220;Trust Account&#8221;) and invested in U.S. government securities, within the meaning
set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the &#8220;Investment Company Act&#8221;), with a maturity
of 185 days or less or in money market funds meeting the conditions of the Investment Company Act, as determined by the Company, until
the earlier of: (i) the completion of a business combination and (ii) the distribution of the Trust Account, as described below.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">The Company&#8217;s management
has broad discretion with respect to the specific application of the net proceeds of the IPO and the sale of the Private Placement Units,
although substantially all of the net proceeds are intended to be applied generally toward consummating a business combination. There
is no assurance that the Company will be able to complete a business combination successfully. The Company must complete one or more initial
business combinations having an aggregate fair market value of at least <ix:nonFraction contextRef="c422" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:FairValueInvestmentsEntitiesThatCalculateNetAssetValuePerShareRedemptionRestrictionPercentage" scale="-2" unitRef="pure" id="ixv-35906">80</ix:nonFraction>% of the assets held in the Trust Account (excluding the deferred
underwriting commissions and taxes payable on income earned on the Trust Account) at the time of the agreement to enter into the initial
business combination. However, the Company will only complete a business combination if the post-transaction company owns or acquires
<ix:nonFraction contextRef="c423" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EquityMethodInvestmentOwnershipPercentage" scale="-2" unitRef="pure" id="ixv-35907">50</ix:nonFraction>% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for
it not to be required to register as an investment company under the Investment Company Act. There is no assurance the Company will be
able to successfully effect a business combination.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">The Company will provide
the holders of the outstanding Public Shares (the &#8220;Public Stockholders&#8221;) with the opportunity to redeem all or a portion of
their Public Shares upon the completion of a business combination either (i) in connection with a stockholder meeting called to approve
the business combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of
a business combination or conduct a tender offer will be made by the Company. The Public Stockholders will be entitled to redeem their
Public Shares for a pro rata portion of the amount then in the Trust Account (initially $<ix:nonFraction contextRef="c422" decimals="2" format="ixt:num-dot-decimal" name="cero:RedemptionValuePerShare" scale="0" unitRef="usdPershares" id="ixv-35908">10.20</ix:nonFraction> per Public Share, plus any pro rata interest
then in the Trust Account, net of taxes payable). There will be no redemption rights with respect to the Company&#8217;s warrants.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p></ix:nonNumeric><div>

</div><div>


</div><!-- Field: Page; Sequence: 231; Value: 24 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->31<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PHOENIX BIOTECH ACQUISITION CORP.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>DECEMBER 31, 2023</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c413_cont_2" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c413_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">All of the Public Shares
contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company&#8217;s liquidation,
if there is a stockholder vote or tender offer in connection with the Company&#8217;s business combination and in connection with certain
amendments to the Company&#8217;s amended and restated certificate of incorporation (the &#8220;Charter&#8221;). In accordance with the
rules of the U.S. Securities and Exchange Commission (the &#8220;SEC&#8221;) and its guidance on redeemable equity instruments, which
has been codified in Accounting Standards Codification (&#8220;ASC&#8221;) 480-10-S99, redemption provisions not solely within the control
of a company require common stock subject to redemption to be classified outside of permanent equity. Given that the Public Shares were
issued with other freestanding instruments (i.e., public warrants), the initial carrying value of Class A common stock classified as temporary
equity will be the allocated proceeds determined in accordance with ASC 470-20. The Class A common stock is subject to ASC 480-10-S99.
If it is probable that the equity instrument will become redeemable, the Company has the option to either (i) accrete changes in the redemption
value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable,
if later) to the earliest redemption date of the instrument or (ii) recognize changes in the redemption value immediately as they occur
and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company has elected
to recognize the changes immediately. The accretion or remeasurement will be treated as a deemed dividend (i.e., a reduction to retained
earnings, or in the absence of retained earnings, additional paid-in capital). While redemptions cannot cause the Company&#8217;s net
tangible assets to fall below $<ix:nonFraction contextRef="c422" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:MinimumNetWorthRequiredForCompliance" scale="0" unitRef="usd" id="ixv-35909">5,000,001</ix:nonFraction>, the Public Shares are redeemable and are classified as such on the balance sheet until such
date that a redemption event takes place.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">Redemptions of the Company&#8217;s
Public Shares may be subject to the satisfaction of conditions, including minimum cash conditions, pursuant to an agreement relating to
a business combination. If the Company seeks stockholder approval of the business combination, the Company will proceed with a business
combination if a majority of the shares voted are voted in favor of the business combination, or such other vote as required by law or
stock exchange rule. If a stockholder vote is not required by applicable law or stock exchange listing requirements and the Company does
not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its Charter, conduct the redemptions
pursuant to the tender offer rules of the SEC and file tender offer documents with the SEC prior to completing a business combination.
If, however, stockholder approval of the transaction is required by applicable law or stock exchange listing requirements, or the Company
decides to obtain stockholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy
solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection
with a business combination, the Sponsor has agreed to vote its Founder Shares (as defined in Note 5), Private Placement Shares and any
Public Shares purchased during or after the IPO in favor of approving a business combination. Additionally, each Public Stockholder may
elect to redeem their Public Shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed
transaction.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">Notwithstanding the foregoing,
the Charter provides that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder
is acting in concert or as a &#8220;group&#8221; (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the
&#8220;Exchange Act&#8221;)), will be restricted from redeeming its shares with respect to more than an aggregate of <ix:nonFraction contextRef="c413" decimals="2" format="ixt:num-dot-decimal" name="cero:PercentageOfAggregateShare" scale="-2" unitRef="pure" id="ixv-35910">20</ix:nonFraction>% or more of the
Class A common stock sold in the IPO, without the prior consent of the Company.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">The Company&#8217;s Sponsor,
officers and directors (the &#8220;Initial Stockholders&#8221;) have agreed not to propose an amendment to the Charter that would affect
the substance or timing of the Company&#8217;s obligation to redeem <ix:nonFraction contextRef="c424" decimals="2" format="ixt:num-dot-decimal" name="cero:PercentageOfPublicSharesThatWouldNotBeRedeemedIfBusinessCombinationIsNotCompletedWithinInitialCombinationPeriod" scale="-2" unitRef="pure" id="ixv-35911">100</ix:nonFraction>% of its Public Shares if the Company does not complete a business
combination within the business combination period, unless the Company provides the Public Stockholders with the opportunity to redeem
their shares of Class A common stock in conjunction with any such amendment.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">On December 16, 2022, the
Company held a special meeting of its stockholders (the &#8220;First Special Meeting&#8221;). At the Special Meeting, the Company&#8217;s
stockholders approved an amendment (the &#8220;First IMTA Amendment&#8221;) to the Company&#8217;s Investment Management Trust Agreement
(the &#8220;IMTA&#8221;), dated October 5, 2021, with Continental Stock Transfer &amp; Trust Company (&#8220;CST&#8221;), as trustee,
and an amendment to the Company&#8217;s Charter (the &#8220;First Charter Amendment&#8221;), to extend the business combination period
up to three times for three months each time (the &#8220;First Extension&#8221;).</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">In connection with the First
Special Meeting, the Sponsor agreed that if the First Charter Amendment and the First IMTA Amendment were approved at the First Special
Meeting, the Sponsor, or one or more of its affiliates, members or third-party designees (in such capacity, the &#8220;Lender&#8221;),
would lend to the Company up to $<ix:nonFraction contextRef="c425" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityMaximumBorrowingCapacity" scale="0" unitRef="usd" id="ixv-35912">1,500,000</ix:nonFraction> to be deposited into the Trust Account established in connection with the IPO. Accordingly,
on December 20, 2022, the Company issued an unsecured promissory note in the principal amount of $<ix:nonFraction contextRef="c426" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentFaceAmount" scale="0" unitRef="usd" id="ixv-35913">1,500,000</ix:nonFraction> (the &#8220;Promissory Note&#8221;)
to the Lender, pursuant to which the Lender agreed to loan to the Company up to $<ix:nonFraction contextRef="c427" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:LineOfCreditFacilityMaximumBorrowingCapacity" scale="0" unitRef="usd" id="ixv-35914">1,500,000</ix:nonFraction> in connection with the extension of the date
by which the Company has to consummate an initial Business Combination.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">In connection with the approval
of the Extension, holders of <ix:nonFraction contextRef="c428" decimals="0" format="ixt:num-dot-decimal" name="cero:ExercisedSharesRedemption" scale="0" unitRef="shares" id="ixv-35915">16,211,702</ix:nonFraction> Public Shares exercised redemption rights. As a result, following the satisfaction of such redemptions,
as of December 31, 2022, the Company had <ix:nonFraction contextRef="c429" decimals="INF" format="ixt:num-dot-decimal" name="cero:NumberOfTemporaryEquitySharesOutstandingForRedemptions" scale="0" unitRef="shares" id="ixv-35916">2,173,298</ix:nonFraction> shares of Class A common stock outstanding, of which (i) <ix:nonFraction contextRef="c430" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockValue" scale="0" unitRef="usd" id="ixv-35917">1,288,298</ix:nonFraction> were Public Shares,
which were entitled to receive a pro rata portion of the remaining funds in the Trust Account in connection with its initial Business
Combination, a liquidation or certain other events, and (ii) <ix:nonFraction contextRef="c431" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockValue" scale="0" unitRef="usd" id="ixv-35918">885,000</ix:nonFraction> were Private Placement Shares, which did not have redemption rights.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p></ix:continuation><div>

</div><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PHOENIX BIOTECH ACQUISITION CORP.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>DECEMBER 31, 2023</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c413_cont_3" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c413_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">On March 31, 2023, May 8,
2023 and June 30, 2023, the Company deposited $<ix:nonFraction contextRef="c432" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AssetsHeldInTrustNoncurrent" scale="0" unitRef="usd" id="ixv-35919">100,000</ix:nonFraction>, $<ix:nonFraction contextRef="c433" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AssetsHeldInTrustNoncurrent" scale="0" unitRef="usd" id="ixv-35920">125,000</ix:nonFraction> and $<ix:nonFraction contextRef="c434" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AssetsHeldInTrustNoncurrent" scale="0" unitRef="usd" id="ixv-35921">150,000</ix:nonFraction> into the Trust Account in connection with the First Extension.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">On July 7, 2023, the Company
held a special meeting of its stockholders (the &#8220;Second Special Meeting&#8221;). At the Second Special Meeting, the Company&#8217;s
stockholders approved an amendment to the IMTA, as amended by the IMTA Amendment (the &#8220;Second IMTA Amendment&#8221;), and an amendment
to the Company&#8217;s Charter, as amended by the Charter Amendment (the &#8220;Second Charter Amendment&#8221;), to extend the business
combination period for up to six times for one month each time (the &#8220;Second Extension&#8221;).</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">On July 7, 2023, July 28,
2023, September 1, 2023, October 4, 2023, November 2, 2023 and November 30, 2023, the Company deposited $<ix:nonFraction contextRef="c435" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AssetsHeldInTrustNoncurrent" scale="0" unitRef="usd" id="ixv-35922">37,052</ix:nonFraction>, $<ix:nonFraction contextRef="c436" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AssetsHeldInTrustNoncurrent" scale="0" unitRef="usd" id="ixv-35923">8,846</ix:nonFraction>, $<ix:nonFraction contextRef="c437" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AssetsHeldInTrustNoncurrent" scale="0" unitRef="usd" id="ixv-35924">22,949</ix:nonFraction>, $<ix:nonFraction contextRef="c438" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AssetsHeldInTrustNoncurrent" scale="0" unitRef="usd" id="ixv-35925">22,949</ix:nonFraction>,
$<ix:nonFraction contextRef="c439" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AssetsHeldInTrustNoncurrent" scale="0" unitRef="usd" id="ixv-35926">22,949</ix:nonFraction> and $<ix:nonFraction contextRef="c422" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AssetsHeldInTrustNoncurrent" scale="0" unitRef="usd" id="ixv-35927">22,949</ix:nonFraction> into the Trust Account in connection with the Second Extension.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">As a result of the deposits
described above, such payments and accrual of interest, the balance in the Trust Account as of December 31, 2023 is approximately $<ix:nonFraction contextRef="c422" decimals="-5" format="ixt:num-dot-decimal" name="cero:PaymentsForAccrualOfInterestInTrustAccount" scale="6" unitRef="usd" id="ixv-35928">8.4</ix:nonFraction>
million.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">If the Company is unable
to complete a business combination by <ix:nonNumeric contextRef="c440" format="ixt:date-monthname-day-year-en" name="us-gaap:BusinessAcquisitionEffectiveDateOfAcquisition1" id="ixv-35929">January 8, 2024</ix:nonNumeric> (as extended) (the &#8220;business combination period&#8221;), the Company will
(i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business
days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the
Trust Account including interest earned on the funds held in the Trust Account and not previously released to us to pay the Company&#8217;s
franchise and income taxes (less up to $<ix:nonFraction contextRef="c413" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DisposalGroupIncludingDiscontinuedOperationInterestExpense" scale="0" unitRef="usd" id="ixv-35930">100,000</ix:nonFraction> of interest to pay dissolution expenses), divided by the number of then outstanding Public
Shares, which redemption will completely extinguish Public Stockholders&#8217; rights as stockholders (including the right to receive
further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of the Company&#8217;s remaining stockholders and the Company&#8217;s board of directors, dissolve and liquidate,
subject in each case to the Company&#8217;s obligations under Delaware law to provide for claims of creditors and the requirements of
other applicable law.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">The Initial Stockholders
have agreed to waive their liquidation rights with respect to the Founder Shares and Private Placement Shares if the Company fails to
complete a business combination within the business combination period. However, if the Initial Stockholders should acquire Public Shares
in or after the IPO, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the
Company fails to complete a business combination within the business combination period. The underwriter has agreed to waive its rights
to the deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a business combination
within the business combination period, and, in such event, such amounts will be included with the other funds held in the Trust Account
that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share
value of the residual assets remaining available for distribution (including Trust Account assets) will be only $<ix:nonFraction contextRef="c422" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:SaleOfStockPricePerShare" scale="0" unitRef="usdPershares" id="ixv-35931">10.20</ix:nonFraction> per share held
in the Trust Account. In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if
and to the extent any claims by a vendor for services rendered or products sold to the Company, or a prospective target business with
which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account. This liability
will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in
or to any monies held in the Trust Account or to any claims under the Company&#8217;s indemnity of the underwriter of the IPO against
certain liabilities, including liabilities under the Securities Act of 1933, as amended (the &#8220;Securities Act&#8221;). Moreover,
in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent
of any liability for such third-party claims.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">The Company will seek to
reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all
vendors, service providers (except the Company&#8217;s independent registered public accounting firm), prospective target businesses or
other entities with which the Company does business, execute agreements waiving any right, title, interest or claim of any kind in or
to monies held in the Trust Account.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Business Combination Agreement with CERo Therapeutics,
Inc. (&#8220;CERo&#8221;)</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">On June&#160;4, 2023, the Company entered into
a business combination agreement and plan of reorganization (the &#8220;Business Combination Agreement&#8221;), by and among the Company,
PBCE Merger Sub, Inc., a Delaware corporation (&#8220;Merger Sub&#8221;), and CERo. Immediately after the merger, the Company changed
its name from Phoenix Biotech Acquisition Corporation to CERo Therapeutics Holdings, Inc.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p></ix:continuation><div>

</div><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PHOENIX BIOTECH ACQUISITION CORP.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>DECEMBER 31, 2023</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><ix:continuation continuedAt="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c413_cont_4" id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c413_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">At the effective time (the
&#8220;Effective Time&#8221;) of the of the merger between Merger Sub and CERo (the &#8220;Business Combination&#8221;), (i)&#160;each
outstanding share of CERo common stock, par value $<ix:nonFraction contextRef="c441" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:CommonStockParOrStatedValuePerShare" scale="0" unitRef="usdPershares" id="ixv-35932">0.0001</ix:nonFraction> per share (the &#8220;CERo common stock&#8221;), will be cancelled and converted
into (a)&#160;the right to receive a number of shares of Class&#160;A common stock, par value $<ix:nonFraction contextRef="c442" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:CommonStockParOrStatedValuePerShare" scale="0" unitRef="usdPershares" id="ixv-35933">0.0001</ix:nonFraction> per share (&#8220;Class&#160;A common
stock&#8221;), equal to $<ix:nonFraction contextRef="c413" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OtherPaymentsToAcquireBusinesses" scale="0" unitRef="usd" id="ixv-35934">50,000,000</ix:nonFraction>,&#160;<i>minus</i>&#160;the Aggregate Liquidation Preference (as defined in the Business Combination
Agreement),&#160;<i>divided</i>&#160;by the Fully Diluted Company Capitalization (as defined in the Business Combination Agreement),&#160;<i>divided</i>&#160;by
$<ix:nonFraction contextRef="c443" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:BusinessAcquisitionSharePrice" scale="0" unitRef="usdPershares" id="ixv-35935">10.00</ix:nonFraction> (the &#8220;Exchange Ratio&#8221;) and (b)&#160;the right to receive a portion of up to <ix:nonFraction contextRef="c413" decimals="0" format="ixt:num-dot-decimal" name="cero:AdditionalUnitsIssuedDuringPeriodSharesNewIssues" scale="0" unitRef="shares" id="ixv-35936">2,200,000</ix:nonFraction> additional shares of Class&#160;A
common stock if certain trading price hurdles are achieved or a Change of Control (as defined in the Business Combination Agreement) occurs
within four years after the Closing (&#8220;Earnout Shares&#8221;); (ii)&#160;each outstanding option to purchase CERo common stock (each,
a &#8220;CERo option&#8221;) will be converted into an option to purchase a number of shares of Class&#160;A common stock, equal to (A)&#160;the
number of shares of CERo common stock subject to such option immediately prior to the Effective Time,&#160;<i>multiplied</i>&#160;by (B)&#160;the
Exchange Ratio, at an exercise price per share equal to the current exercise price per share for such option divided by the Exchange Ratio;
in each case, rounded down to the nearest whole share, and rounded up to the nearest whole cent in the case of the exercise price of the
CERo options; (iii)&#160;each outstanding share of CERo preferred stock, par value $<ix:nonFraction contextRef="c444" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockParOrStatedValuePerShare" scale="0" unitRef="usdPershares" id="ixv-35937">0.0001</ix:nonFraction> per share (the &#8220;CERo preferred stock&#8221;),
will be converted into a number of shares of Class&#160;A common stock, equal to the number of shares of Class&#160;A common stock obtained
by&#160;<i>dividing</i>&#160;the liquidation preference thereof by $<ix:nonFraction contextRef="c422" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockLiquidationPreference" scale="0" unitRef="usdPershares" id="ixv-35938">10.00</ix:nonFraction> and the contingent right to receive such holder&#8217;s&#160;Earn-Out&#160;Pro
Rata Portion (as defined in the Business Combination Agreement), and (iv)&#160;each warrant to purchase CERo preferred stock (each, a
&#8220;CERo warrant&#8221;) outstanding as of immediately prior to the Effective Time will be converted into a warrant to acquire a number
of shares of Class&#160;A common stock equal to the number of shares of CERo preferred stock subject to the corresponding warrant immediately
prior to the Effective Time,&#160;<i>multiplied</i>&#160;by the Aggregate Liquidation Preference of such underlying shares of CERo preferred
stock, and&#160;<i>divided</i>&#160;by $<ix:nonFraction contextRef="c445" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightExercisePriceOfWarrantsOrRights1" scale="0" unitRef="usdPershares" id="ixv-35939">10.00</ix:nonFraction>, with the exercise price per share for such warrant equal to (A)&#160;the current aggregate
exercise price of such warrant (the current exercise price per share of CERo preferred stock applicable to the corresponding warrant immediately
prior to the Effective Time,&#160;<i>multiplied</i>&#160;by the number of shares of CERo preferred stock issuable upon exercise thereof),&#160;<i>divided</i>&#160;by
(B)&#160;the number of shares of Class&#160;A common stock issuable upon exercise thereof. Subject to certain exceptions, such terms and
conditions applicable to a CERo Therapeutics Holdings, Inc. (&#8220;New CERo&#8221;) warrant will be the same terms and conditions as
were applicable to a CERo warrant immediately prior to the Effective Time. The Company will issue an aggregate of approximately <ix:nonFraction contextRef="c428" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodValueStockOptionsExercised" scale="6" unitRef="usd" id="ixv-35940">5.0</ix:nonFraction>&#160;million
shares of Class&#160;A common stock to the holders of CERo common stock and CERo preferred stock as consideration in the Business Combination.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>NASDAQ Notice</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">On April 3, 2023, the Company
received a letter (the &#8220;Letter&#8221;) from the staff at The Nasdaq Global Market (&#8220;Nasdaq&#8221;) notifying the Company that,
for the 30 consecutive trading days prior to the date of the Letter, the Company&#8217;s common stock had traded at a value below the
minimum $<ix:nonFraction contextRef="c446" decimals="0" format="ixt:num-dot-decimal" name="cero:CommonStockHadTradedAtAValue" scale="0" unitRef="usd" id="ixv-35941">50,000,000</ix:nonFraction> &#8220;Market Value of Listed Securities&#8221; (&#8220;MVLS&#8221;) requirement set forth in Nasdaq Listing Rule
5450(b)(2)(A), which is required for continued listing of the Company&#8217;s common stock on Nasdaq. The Letter is only a notification
of deficiency, not of imminent delisting, and has no current effect on the listing or trading of the Company&#8217;s securities on Nasdaq.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">In order to bring the Company
into compliance with the MVLS requirement, on July 3, 2023, the Sponsor elected to effect the Conversion. As of the date hereof, there
are <ix:nonFraction contextRef="c447" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesOutstanding" scale="0" unitRef="shares" id="ixv-35942"><ix:nonFraction contextRef="c447" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesIssued" scale="0" unitRef="shares" id="ixv-35943">6,246,207</ix:nonFraction></ix:nonFraction> shares of Class A common stock and <ix:nonFraction contextRef="c448" decimals="0" format="ixt:fixed-zero" name="us-gaap:CommonStockSharesOutstanding" scale="0" unitRef="shares" id="ixv-35944"><ix:nonFraction contextRef="c448" decimals="0" format="ixt:fixed-zero" name="us-gaap:CommonStockSharesIssued" scale="0" unitRef="shares" id="ixv-35945">no</ix:nonFraction></ix:nonFraction> shares of Class B common stock issued and outstanding and entitled to vote.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">On September 7, 2023, the
Company received a written notice (the &#8220;Notice&#8221;) from the Nasdaq Listing Qualifications Department of Nasdaq indicating that
the Company was not in compliance with Listing Rule 5450(a)(2), which requires the Company to have at least 400 public holders for continued
listing on the Nasdaq Global Market (the &#8220;Minimum Public Holders Rule&#8221;). The Notice is only a notification of deficiency,
not of imminent delisting, and has no current effect on the listing or trading of the Company&#8217;s securities on Nasdaq Global Market.
The Notice states that the Company has 45 calendar days to submit a plan to regain compliance with the Minimum Public Holders Rule. The
Company has submitted a plan to regain compliance with the Minimum Public Holders Rule. If Nasdaq accepts the Company&#8217;s plan, Nasdaq
may grant the Company an extension of up to 180 calendar days from the date of the Notice to evidence compliance with the Minimum Public
Holders Rule. If Nasdaq does not accept the Company&#8217;s plan, the Company will have the opportunity to appeal the decision in front
of a Nasdaq Hearings Panel.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">The MVLS deficiency was cured
by the conversion of the Class B common stock into Class A common stock because the Class A common stock held by Sponsor count towards
satisfying such requirement. The Company submitted a &#8220;plan of compliance&#8221; to NASDAQ indicating that the Company was aiming
to be able to cure the deficiency upon closing of the Business Combination. Nasdaq has not responded.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>

</div><div>


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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->34<!-- Field: /Sequence --></span></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PHOENIX BIOTECH ACQUISITION CORP.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>DECEMBER 31, 2023</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation id="_OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-c413_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Inflation Reduction Act of 2022 (the &#8220;IR
Act&#8221;)</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">On August 16, 2022, the Inflation
Reduction Act of 2022 (the &#8220;IR Act&#8221;) was signed into federal law. The IR Act provides for, among other things, a new U.S.
federal <ix:nonFraction contextRef="c449" decimals="2" format="ixt:num-dot-decimal" name="cero:PercentageOfExciseTax" scale="-2" unitRef="pure" id="ixv-35946">1</ix:nonFraction>% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries
of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation
itself, not its stockholders from which shares are repurchased. The amount of the excise tax is generally <ix:nonFraction contextRef="c413" decimals="2" format="ixt:num-dot-decimal" name="cero:PercentageOfExciseTax" scale="-2" unitRef="pure" id="ixv-35947">1</ix:nonFraction>% of the fair market value
of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations
are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the
same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the &#8220;Treasury&#8221;)
has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">Any redemption or other repurchase
that occurs after December 31, 2022, in connection with a business combination, extension vote or otherwise, may be subject to the excise
tax. Whether and to what extent the Company would be subject to the excise tax in connection with a business combination, extension vote
or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection
with the business combination, extension or otherwise, (ii) the structure of a business combination, (iii) the nature and amount of any
&#8220;PIPE&#8221; or other equity issuances in connection with a business combination (or otherwise issued not in connection with a business
combination but issued within the same taxable year of a business combination) and (iv) the content of regulations and other guidance
from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics
of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand
to complete a business combination and in the Company&#8217;s ability to complete a business combination.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">On July 17, 2023, the Company
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in connection with the implementation of the Extension. The Company evaluated the classification and accounting of the stock redemption
under ASC 450, &#8220;Contingencies&#8221; to determine whether the Company should currently recognize an excise tax obligation associated
therewith. ASC 450 states that when a loss contingency exists the likelihood that the future event(s) will confirm the loss or impairment
of an asset, or the incurrence of a liability can range from probable to remote. Contingent liability must be reviewed at each reporting
period to determine appropriate treatment. The Company evaluated whether a United States excise tax obligation should be recognized currently
related to the stock redemption and concluded that this obligation should be recognized. As of December 31, 2023, the Company recorded
$<ix:nonFraction contextRef="c422" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SalesAndExciseTaxPayableCurrentAndNoncurrent" scale="0" unitRef="usd" id="ixv-35950">56,389</ix:nonFraction> of excise tax liability calculated as <ix:nonFraction contextRef="c413" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:DepositLiabilitiesOtherAverageRatePaid" scale="-2" unitRef="pure" id="ixv-35951">1</ix:nonFraction>% of shares redeemed on July 17, 2023. Any reduction to this liability resulting from either
a subsequent stock issuance or an event giving rise to an exception that occurs within this tax year, will be recognized in the period
(including an interim period) that such stock issuance or event giving rise to an exception occurs.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Liquidity and Going Concern</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">As of December 31, 2023,
the Company had $<ix:nonFraction contextRef="c452" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CashAndCashEquivalentsAtCarryingValue" scale="0" unitRef="usd" id="ixv-35952">96,873</ix:nonFraction> in its operating bank accounts, $<ix:nonFraction contextRef="c422" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AssetsHeldInTrustCurrent" scale="0" unitRef="usd" id="ixv-35953">8,436,311</ix:nonFraction> in marketable securities held in the Trust Account to be used for a
business combination or to repurchase or redeem its Public Shares in connection therewith and a working capital deficit of $<ix:nonFraction contextRef="c422" decimals="0" format="ixt:num-dot-decimal" name="cero:NetWorkingCapital" scale="0" unitRef="usd" id="ixv-35954">5,049,122</ix:nonFraction>.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">On May 9, 2023, the Company
received a notice from the IRS stating an additional $<ix:nonFraction contextRef="c453" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredFederalIncomeTaxExpenseBenefit" scale="0" unitRef="usd" id="ixv-35955">182,308</ix:nonFraction> of federal income taxes were due by May 22, 2023. The Company made this
payment on June 23, 2023.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">The accompanying financial
statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets
and satisfaction of liabilities in the normal course of business. The Company&#8217;s ability to continue as a going concern is dependent
on its ability to raise additional capital to fund its research and development (&#8220;R&amp;D&#8221;) activities and meet its obligations
on a timely basis. Since inception, the Company has incurred net losses and operating cash flow deficits, resulting in an accumulated
deficit of $<ix:nonFraction contextRef="c422" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:RetainedEarningsAppropriated" scale="6" unitRef="usd" id="ixv-35956">14.2</ix:nonFraction> million as of December&#160;31, 2023. On February 14, 2024, the Company acquired the assets of CERo Therapeutics, Inc.,
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are necessary to maintain current operations and to continue R&amp;D activities. However, there can be no assurance that sufficient funding
will be available to allow the Company to successfully continue its R&amp;D activities and planned regulatory filings with the Food and
Drug Administration (&#8220;FDA&#8221;). If the Company is unable to obtain necessary funds, significant reductions in spending and the
delay or cancellation of planned activities may be necessary. These actions would have a material adverse effect on the Company&#8217;s
business, results of operations, and prospects. These conditions raise substantial doubt about the Company&#8217;s ability to continue
as a going concern within one year from the date these financial statements are issued. The accompanying financial statements do not include
any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities
that might result from the outcome of this uncertainty.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>


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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->35<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PHOENIX BIOTECH ACQUISITION CORP.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>DECEMBER 31, 2023</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><ix:nonNumeric contextRef="c413" continuedAt="_SignificantAccountingPoliciesTextBlock-c413_cont_1" escape="true" name="us-gaap:SignificantAccountingPoliciesTextBlock" id="ixv-28968"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Note 2 &#8212; Summary of Significant Accounting
Policies</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<ix:nonNumeric contextRef="c413" continuedAt="_BasisOfAccountingPolicyPolicyTextBlock-c413_cont_1" escape="true" name="us-gaap:BasisOfAccountingPolicyPolicyTextBlock" id="ixv-28972"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Basis of Presentation</i></p></ix:nonNumeric>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<ix:continuation id="_BasisOfAccountingPolicyPolicyTextBlock-c413_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">The accompanying financial
statements are presented in accordance with accounting principles generally accepted in the United States of America (&#8220;GAAP&#8221;)
and pursuant to the rules and regulations of the SEC.</p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<ix:nonNumeric contextRef="c413" continuedAt="_PriorPeriodReclassificationAdjustmentDescription-c413_cont_1" escape="true" name="us-gaap:PriorPeriodReclassificationAdjustmentDescription" id="ixv-28979"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Reclassifications</i></p></ix:nonNumeric>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<ix:continuation continuedAt="_PriorPeriodReclassificationAdjustmentDescription-c413_cont_2" id="_PriorPeriodReclassificationAdjustmentDescription-c413_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">Certain prior year amounts
have been reclassified due to an immaterial correction of an error and for consistency with the current period presentation. These reclassifications
had no effect on the reported results of operations. An adjustment for $<ix:nonFraction contextRef="c428" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:TemporaryEquityIssuePeriodIncreaseOrDecrease" scale="0" unitRef="usd" id="ixv-35958">244,777</ix:nonFraction> has been made to Class&#160;A common stock subject to
possible redemption and Accumulated deficit as of December&#160;31, 2022 to correct the total amount redeemable to stockholders.</p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<ix:continuation id="_PriorPeriodReclassificationAdjustmentDescription-c413_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">In the Form 10-Q for three
months ended March 31, 2023, the Company discovered an error in the Statement of Cash Flows for the presentation of restricted cash. The
error was not corrected and persisted in the statements of cash flows in the quarterly reports on 10-Q for the three months ended June
30, 2023 and September 30, 2023. These errors had no impact on the balance sheets or the statements of operations in those periods. This
error is corrected in the statement of cash flows in the Company&#8217;s December 31, 2023 audited financial statements.</p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<ix:nonNumeric contextRef="c413" continuedAt="cero_EmergingGrowthCompanyPolicyTextBlock-c413_cont_1" escape="true" name="cero:EmergingGrowthCompanyPolicyTextBlock" id="ixv-28989"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Emerging Growth Company</i></p></ix:nonNumeric>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<ix:continuation continuedAt="cero_EmergingGrowthCompanyPolicyTextBlock-c413_cont_2" id="cero_EmergingGrowthCompanyPolicyTextBlock-c413_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">The Company is an &#8220;emerging
growth company,&#8221; as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012
(the &#8220;JOBS Act&#8221;), and it may take advantage of certain exemptions from various reporting requirements that are applicable
to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the
independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations
regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding
advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.</p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<ix:continuation id="cero_EmergingGrowthCompanyPolicyTextBlock-c413_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">Further, Section 102(b)(1)
of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until
private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class
of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS
Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging
growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period
which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company,
as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of the Company&#8217;s financial statements with another public company which is neither an emerging growth company
nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential
differences in accounting standards used.</p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<ix:nonNumeric contextRef="c413" continuedAt="_UseOfEstimates-c413_cont_1" escape="true" name="us-gaap:UseOfEstimates" id="ixv-28999"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Use of Estimates</i></p></ix:nonNumeric>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

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statements in conformity with U.S. GAAP requires the Company&#8217;s management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.</p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<ix:continuation id="_UseOfEstimates-c413_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">Making estimates requires
management to exercise significant judgment. Such estimates may be subject to change as more current information becomes available and
accordingly the actual results could differ significantly from those estimates. It is at least reasonably possible that the estimate of
the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered
in formulating its estimate, could change in the near term due to one or more future confirming events. Actual results could differ from
those estimates.</p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<ix:nonNumeric contextRef="c413" continuedAt="_CashAndCashEquivalentsPolicyTextBlock-c413_cont_1" escape="true" name="us-gaap:CashAndCashEquivalentsPolicyTextBlock" id="ixv-29009"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Cash and Cash Equivalents</i></p></ix:nonNumeric>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<ix:continuation id="_CashAndCashEquivalentsPolicyTextBlock-c413_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">The Company considers all
short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have
any cash equivalents as of December 31, 2023 and 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p></ix:continuation></ix:nonNumeric><div>

</div><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PHOENIX BIOTECH ACQUISITION CORP.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>DECEMBER 31, 2023</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p>

<ix:nonNumeric contextRef="c413" continuedAt="_MarketableSecuritiesPolicy-c413_cont_1" escape="true" name="us-gaap:MarketableSecuritiesPolicy" id="ixv-29105"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Money Market Funds Held in Trust Account</i></p></ix:nonNumeric>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<ix:continuation id="_MarketableSecuritiesPolicy-c413_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">At December 31, 2023, the
assets held in Trust Account were held in money market funds that invested in U.S. Treasury securities. At December&#160;31, 2022, substantially
all of the assets held in the Trust Account were held as cash. The Company&#8217;s investments held in the Trust Account are classified
as trading securities. Trading securities are presented on the balance sheets at fair value at the end of each reporting period. Gains
and losses resulting from the change in fair value of investments held in the&#160;Trust Account and interest earned on marketable securities
are included in the accompanying statements of operations. The estimated fair values of investments held in&#160;the Trust Account are
determined using available market information.</p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p>

<ix:nonNumeric contextRef="c413" continuedAt="_SharesSubjectToMandatoryRedemptionChangesInRedemptionValuePolicyTextBlock-c413_cont_1" escape="true" name="us-gaap:SharesSubjectToMandatoryRedemptionChangesInRedemptionValuePolicyTextBlock" id="ixv-29113"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Shareholder Redemption Liability</i></p></ix:nonNumeric>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<ix:continuation id="_SharesSubjectToMandatoryRedemptionChangesInRedemptionValuePolicyTextBlock-c413_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">On December&#160;20, 2022,
in connection with the Company&#8217;s special meeting held to consider the First Charter Amendment, the Company&#8217;s stockholders
redeemed <ix:nonFraction contextRef="c456" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:StockRedeemedOrCalledDuringPeriodShares" scale="0" unitRef="shares" id="ixv-35967">16,211,702</ix:nonFraction>&#160;shares of Class&#160;A common stock subject to possible redemption at $<ix:nonFraction contextRef="c456" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:CommonStockConvertibleConversionPriceIncrease" scale="0" unitRef="usdPershares" id="ixv-35968">10.20</ix:nonFraction>&#160;per share redemption value,
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stockholders on January&#160;3, 2023. Therefore, a portion of the total redemption payment has been classified as a stockholder redemption
liability in the accompanying balance sheet&#160;as of December&#160;31, 2022.</p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p>

<ix:nonNumeric contextRef="c413" continuedAt="_DeferredChargesPolicyTextBlock-c413_cont_1" escape="true" name="us-gaap:DeferredChargesPolicyTextBlock" id="ixv-29121"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Offering Costs Associated with the IPO</i></p></ix:nonNumeric>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<ix:continuation id="_DeferredChargesPolicyTextBlock-c413_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">Offering costs, including
additional underwriting fees associated with the underwriter&#8217;s partial exercise of the over-allotment option, consist principally
of legal, accounting, underwriting fees and other costs directly related to the IPO. Offering costs, including those attributable to the
underwriter&#8217;s partial exercise of the over-allotment option, amounted to $<ix:nonFraction contextRef="c459" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredOfferingCosts" scale="0" unitRef="usd" id="ixv-35973">12,729,318</ix:nonFraction>. This amount was charged to stockholders&#8217;
deficit upon the completion of the IPO.</p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<ix:nonNumeric contextRef="c413" continuedAt="_ConcentrationRiskCreditRisk-c413_cont_1" escape="true" name="us-gaap:ConcentrationRiskCreditRisk" id="ixv-29128"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Concentration of Credit Risk</i></p></ix:nonNumeric>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<ix:continuation id="_ConcentrationRiskCreditRisk-c413_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">Financial instruments that
potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times,
may exceed the Federal Deposit Insurance Corporation coverage limit of $<ix:nonFraction contextRef="c422" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CashFDICInsuredAmount" scale="0" unitRef="usd" id="ixv-35974">250,000</ix:nonFraction>. At December 31, 2023 and 2022, the Company has not experienced
losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.</p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p>

<ix:nonNumeric contextRef="c413" continuedAt="_FairValueOfFinancialInstrumentsPolicy-c413_cont_1" escape="true" name="us-gaap:FairValueOfFinancialInstrumentsPolicy" id="ixv-29136"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Fair Value of Financial Instruments</i></p></ix:nonNumeric>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

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financial assets and liabilities reflects management&#8217;s estimate of amounts that the Company would have received in connection with
the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants
at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the
use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions
about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities
based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:</p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<ix:continuation continuedAt="_FairValueOfFinancialInstrumentsPolicy-c413_cont_3" id="_FairValueOfFinancialInstrumentsPolicy-c413_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">Level&#160;1: Quoted prices
in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for
the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p></ix:continuation></ix:continuation><div>

</div><div>


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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->37<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PHOENIX BIOTECH ACQUISITION CORP.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>DECEMBER 31, 2023</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c413_cont_3" id="_SignificantAccountingPoliciesTextBlock-c413_cont_2"><ix:continuation continuedAt="_FairValueOfFinancialInstrumentsPolicy-c413_cont_4" id="_FairValueOfFinancialInstrumentsPolicy-c413_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">Level&#160;2: Observable
inputs other than Level&#160;1 inputs. Examples of Level&#160;2 inputs include quoted prices in active markets for similar assets or liabilities
and quoted prices for identical assets or liabilities in markets that are not active.</p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<ix:continuation id="_FairValueOfFinancialInstrumentsPolicy-c413_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">Level&#160;3: Unobservable
inputs based on the Company&#8217;s assessment of the assumptions that market participants would use in pricing the asset or liability.</p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p>

<ix:nonNumeric contextRef="c413" continuedAt="_IncomeTaxPolicyTextBlock-c413_cont_1" escape="true" name="us-gaap:IncomeTaxPolicyTextBlock" id="ixv-29178"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Income Taxes</i></p></ix:nonNumeric>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p>

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the accounting and reporting requirements of ASC 740, &#8220;Income Taxes&#8221; (&#8220;ASC 740&#8221;), which requires an asset and
liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for
differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts,
based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation
allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.</p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

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threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be
taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination
by taxing authorities. There were <span style="-sec-ix-hidden: hidden-fact-322"><span style="-sec-ix-hidden: hidden-fact-323">no</span></span> unrecognized tax benefits as of December 31, 2023 and 2022. The Company recognizes accrued interest
and penalties related to unrecognized tax benefits as income tax expense. <span style="-sec-ix-hidden: hidden-fact-324"><span style="-sec-ix-hidden: hidden-fact-325">No</span></span> amounts were accrued for the payment of interest and penalties
at December 31, 2023 and 2022. The Company is currently not aware of any issues under review that could result in significant payments,
accruals, or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since
inception.</p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

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and assets are determined based on the difference between the financial statement and tax basis of assets and liabilities, using enacted
tax rates in effect for the year in which the differences are expected to reverse. Current income taxes are based on the year&#8217;s
income taxable for federal and state income tax reporting purposes. Total tax provision may differ from the statutory tax rates applied
to income before provision for income taxes due principally to expenses charged which are not tax deductible.</p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<ix:continuation continuedAt="_IncomeTaxPolicyTextBlock-c413_cont_5" id="_IncomeTaxPolicyTextBlock-c413_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><ix:nonNumeric contextRef="c413" continuedAt="_ScheduleOfComponentsOfIncomeTaxExpenseBenefitTableTextBlock-c413_cont_1" escape="true" name="us-gaap:ScheduleOfComponentsOfIncomeTaxExpenseBenefitTableTextBlock" id="ixv-35975">The total provision benefit for income taxes is
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

<ix:continuation id="_ScheduleOfComponentsOfIncomeTaxExpenseBenefitTableTextBlock-c413_cont_1"><ix:continuation continuedAt="_IncomeTaxPolicyTextBlock-c413_cont_6" id="_IncomeTaxPolicyTextBlock-c413_cont_5"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p>

<ix:continuation id="_ScheduleOfDeferredTaxAssetsAndLiabilitiesTableTextBlock-c413_cont_1"><ix:continuation continuedAt="_IncomeTaxPolicyTextBlock-c413_cont_8" id="_IncomeTaxPolicyTextBlock-c413_cont_7"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

<ix:continuation id="cero_DisclosureOfReconciliationOfDeferredTaxAssetsTableTextBlock-c413_cont_1"><ix:continuation continuedAt="_IncomeTaxPolicyTextBlock-c413_cont_10" id="_IncomeTaxPolicyTextBlock-c413_cont_9"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PHOENIX BIOTECH ACQUISITION CORP.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>DECEMBER 31, 2023</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c413_cont_4" id="_SignificantAccountingPoliciesTextBlock-c413_cont_3"><ix:continuation continuedAt="_IncomeTaxPolicyTextBlock-c413_cont_11" id="_IncomeTaxPolicyTextBlock-c413_cont_10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">In assessing the realization
of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will
not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the
periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled
reversal of deferred tax assets, projected future taxable income and tax planning strategies in making this assessment. For the year ended
December 31, 2023 and 2022, the valuation allowance was $<ix:nonFraction contextRef="c422" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsValuationAllowance" scale="0" unitRef="usd" id="ixv-35990">607,516</ix:nonFraction> and $<ix:nonFraction contextRef="c455" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsValuationAllowance" scale="0" unitRef="usd" id="ixv-35991">596,692</ix:nonFraction>, respectively.</p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

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federal income tax provision (benefit) to the Company&#8217;s effective tax rate is as follows:</ix:nonNumeric></p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

<ix:continuation id="_ScheduleOfEffectiveIncomeTaxRateReconciliationTableTextBlock-c413_cont_1"><ix:continuation id="_IncomeTaxPolicyTextBlock-c413_cont_12"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left; text-indent: -9pt; padding-left: 9pt">Statutory federal income tax rate</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 9pt">State taxes, net of federal tax benefit</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c413" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateReconciliationStateAndLocalIncomeTaxes" scale="-2" unitRef="pure" id="ixv-35995">0.0</ix:nonFraction></td><td style="text-align: left">%</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Valuation allowance</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right">(<ix:nonFraction contextRef="c413" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateReconciliationChangeInDeferredTaxAssetsValuationAllowance" scale="-2" sign="-" unitRef="pure" id="ixv-35997">17.33</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">)%</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 4pt; text-indent: -9pt; padding-left: 9pt">Income tax provision (benefit)</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c413" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateReconciliationOtherReconcilingItemsPercent" scale="-2" unitRef="pure" id="ixv-35999">3.67</ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">%</td><td style="padding-bottom: 4pt">&#160;</td>
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  </table></ix:continuation></ix:continuation>


<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

<ix:nonNumeric contextRef="c413" continuedAt="cero_CommonStockSubjectToPossibleRedemptionPolicyTextBlock-c413_cont_1" escape="true" name="cero:CommonStockSubjectToPossibleRedemptionPolicyTextBlock" id="ixv-29452"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Class&#160;A Common Stock Subject to Possible
Redemption</i></p></ix:nonNumeric>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<ix:continuation continuedAt="cero_CommonStockSubjectToPossibleRedemptionPolicyTextBlock-c413_cont_2" id="cero_CommonStockSubjectToPossibleRedemptionPolicyTextBlock-c413_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">The Company accounts for
its Class&#160;A common stock subject to possible redemption in accordance with the guidance in ASC 480. Shares of Class&#160;A common
stock subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally
redeemable Class&#160;A common stock (including Class&#160;A common stock that features redemption rights that are&#160;within the control
of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company&#8217;s control) is classified
as temporary equity. At all other times, Class&#160;A common stock is classified as stockholders&#8217; equity. The Company&#8217;s Class&#160;A
common stock features certain redemption rights that are considered to be outside of the Company&#8217;s control and subject to occurrence
of uncertain future events. Accordingly, at December 31, 2023 and 2022, <ix:nonFraction contextRef="c422" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:TemporaryEquitySharesOutstanding" scale="0" unitRef="shares" id="ixv-36001">764,957</ix:nonFraction> and <ix:nonFraction contextRef="c455" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:TemporaryEquitySharesOutstanding" scale="0" unitRef="shares" id="ixv-36002">1,288,298</ix:nonFraction> shares of Class&#160;A common stock subject
to possible redemption are presented as temporary equity, outside of the stockholders&#8217; deficit section of the Company&#8217;s balance
sheets.</p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<ix:continuation continuedAt="cero_CommonStockSubjectToPossibleRedemptionPolicyTextBlock-c413_cont_3" id="cero_CommonStockSubjectToPossibleRedemptionPolicyTextBlock-c413_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">The Company recognizes changes
in redemption value immediately as they occur and adjusts the carrying value of redeemable Class&#160;A common stock to equal the redemption
value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges
against additional paid in capital and accumulated deficit.</p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<ix:continuation continuedAt="cero_CommonStockSubjectToPossibleRedemptionPolicyTextBlock-c413_cont_4" id="cero_CommonStockSubjectToPossibleRedemptionPolicyTextBlock-c413_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><ix:nonNumeric contextRef="c413" continuedAt="_TemporaryEquityTableTextBlock-c413_cont_1" escape="true" name="us-gaap:TemporaryEquityTableTextBlock" id="ixv-36003">At December 31, 2023 and
2022, the Class&#160;A common stock subject to possible redemption reflected in the balance sheets is reconciled in the following table:</ix:nonNumeric></p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 12.5pt">&#160;</p>

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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 88%; font-weight: bold; text-align: left">Class&#160;A common stock subject to possible redemption, December&#160;31, 2021</td><td style="width: 1%; font-weight: bold">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 12.5pt; text-align: justify">&#160;</p>

<ix:nonNumeric contextRef="c413" continuedAt="cero_NetLossPerCommonStockPolicyTextBlock-c413_cont_1" escape="true" name="cero:NetLossPerCommonStockPolicyTextBlock" id="ixv-29511"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Net Loss per Common Stock</i></p></ix:nonNumeric>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<ix:continuation continuedAt="cero_NetLossPerCommonStockPolicyTextBlock-c413_cont_2" id="cero_NetLossPerCommonStockPolicyTextBlock-c413_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">The Company has two classes
of shares, which are referred to as Class&#160;A common stock and Class&#160;B common stock (the &#8220;Class B common stock&#8221; or
the &#8220;Founder Shares&#8221;). Earnings and losses are shared pro rata between the two classes of shares. Public Warrants (see Note
3) and Private Placement Warrants (see Note 4) to purchase an aggregate of&#160;<ix:nonFraction contextRef="c460" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightNumberOfSecuritiesCalledByWarrantsOrRights" scale="0" unitRef="shares" id="ixv-36011">9,192,500</ix:nonFraction> shares of Class&#160;A common stock at $<ix:nonFraction contextRef="c460" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightExercisePriceOfWarrantsOrRights1" scale="0" unitRef="usdPershares" id="ixv-36012">11.50</ix:nonFraction>&#160;per
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Placement Warrants were excluded from diluted net income per share for the&#160;year&#160;ended December 31, 2023 and 2022 because they
are contingently exercisable, and the contingencies have not yet been met. As a result, diluted net income per common stock is the same
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p>

<ix:continuation id="_ScheduleOfEarningsPerShareBasicAndDilutedTableTextBlock-c413_cont_1"><ix:continuation id="cero_NetLossPerCommonStockPolicyTextBlock-c413_cont_2"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
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    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c428" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:WeightedAverageNumberOfSharesOutstandingBasic" scale="0" unitRef="shares" id="ixv-36019">4,224,247</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; padding-bottom: 4pt">Basic and diluted net income per share</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(<ix:nonFraction contextRef="c428" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareDiluted" scale="0" sign="-" unitRef="usdPershares" id="ixv-36023"><ix:nonFraction contextRef="c428" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareBasic" scale="0" sign="-" unitRef="usdPershares" id="ixv-36024">0.39</ix:nonFraction></ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(<ix:nonFraction contextRef="c463" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareDiluted" scale="0" sign="-" unitRef="usdPershares" id="ixv-36025"><ix:nonFraction contextRef="c463" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareBasic" scale="0" sign="-" unitRef="usdPershares" id="ixv-36026">0.39</ix:nonFraction></ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(<ix:nonFraction contextRef="c464" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareDiluted" scale="0" sign="-" unitRef="usdPershares" id="ixv-36027"><ix:nonFraction contextRef="c464" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareBasic" scale="0" sign="-" unitRef="usdPershares" id="ixv-36028">0.03</ix:nonFraction></ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">)</td><td style="padding-bottom: 4pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(<ix:nonFraction contextRef="c465" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareDiluted" scale="0" sign="-" unitRef="usdPershares" id="ixv-36029"><ix:nonFraction contextRef="c465" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareBasic" scale="0" sign="-" unitRef="usdPershares" id="ixv-36030">0.03</ix:nonFraction></ix:nonFraction></td><td style="padding-bottom: 2.5pt; text-align: left">)</td></tr>
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</div><div>


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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->39<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PHOENIX BIOTECH ACQUISITION CORP.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>DECEMBER 31, 2023</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 4in">&#160;</p><div>

</div><ix:continuation id="_SignificantAccountingPoliciesTextBlock-c413_cont_4"><ix:nonNumeric contextRef="c413" continuedAt="cero_AccountingForWarrantsPolicyTextBlock-c413_cont_1" escape="true" name="cero:AccountingForWarrantsPolicyTextBlock" id="ixv-29678"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Accounting for Warrants</i></p></ix:nonNumeric>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<ix:continuation id="cero_AccountingForWarrantsPolicyTextBlock-c413_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">The Company accounts for
warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments&#8217; specific terms
and applicable authoritative guidance in ASC 480 and ASC 815, <i>Derivatives and Hedging</i>. The assessment considers whether the instruments
are free standing financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments
meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company&#8217;s
own common stock and whether the instrument holders could potentially require &#8220;net cash settlement&#8221; in a circumstance outside
of the Company&#8217;s control, among other conditions for equity classification. This assessment, which requires the use of professional
judgment, was conducted at the time of warrant issuance and as of each subsequent period end date while the instruments are outstanding.
Management has concluded that the Public Warrants and Private Placement Warrants issued pursuant to the warrant agreement qualify for
equity accounting treatment.</p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p>

<ix:nonNumeric contextRef="c413" continuedAt="_NewAccountingPronouncementsPolicyPolicyTextBlock-c413_cont_1" escape="true" name="us-gaap:NewAccountingPronouncementsPolicyPolicyTextBlock" id="ixv-29687"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Recent Accounting Pronouncements</i></p></ix:nonNumeric>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<ix:continuation continuedAt="_NewAccountingPronouncementsPolicyPolicyTextBlock-c413_cont_2" id="_NewAccountingPronouncementsPolicyPolicyTextBlock-c413_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">In December 2023, the FASB
issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which requires disclosure of incremental
income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements.
ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company&#8217;s management
does not believe the adoption of ASU 2023-09 will have a material impact on its consolidated financial statements and disclosures.</p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<ix:continuation id="_NewAccountingPronouncementsPolicyPolicyTextBlock-c413_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">Management does not believe
that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying
unaudited condensed financial statements.</p></ix:continuation></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><ix:nonNumeric contextRef="c413" escape="true" name="cero:InitialPublicOfferingAndOverAllotmentTextBlock" id="ixv-29700"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Note 3 &#8212; Initial Public Offering and
Over-Allotment</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">Pursuant to the IPO, the
Company sold <ix:nonFraction contextRef="c420" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:SaleOfStockNumberOfSharesIssuedInTransaction" scale="0" unitRef="shares" id="ixv-36031">17,500,000</ix:nonFraction> units (including <ix:nonFraction contextRef="c418" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:PartnersCapitalAccountUnitsSoldInPublicOffering" scale="0" unitRef="shares" id="ixv-36032">2,000,000</ix:nonFraction> units as part of the underwriter&#8217;s partial exercise of the over-allotment option)
at a price of $<ix:nonFraction contextRef="c421" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:SaleOfStockPricePerShare" scale="0" unitRef="usdPershares" id="ixv-36033">10.00</ix:nonFraction> per Unit. Each Unit consists of <ix:nonFraction contextRef="c442" decimals="0" format="ixt-sec:numwordsen" name="us-gaap:ExcessStockSharesIssued" scale="0" unitRef="shares" id="ixv-36034">one</ix:nonFraction> Public Share, and a Public Warrant. Each Public Warrant entitles the holder to
purchase <ix:nonFraction contextRef="c466" decimals="0" format="ixt-sec:numwordsen" name="us-gaap:ExcessStockSharesIssued" scale="0" unitRef="shares" id="ixv-36035">one</ix:nonFraction> share of Class&#160;A common stock at a price of $<ix:nonFraction contextRef="c467" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightExercisePriceOfWarrantsOrRights1" scale="0" unitRef="usdPershares" id="ixv-36036">11.50</ix:nonFraction> per share, subject to adjustment (see Note 7).</p></ix:nonNumeric><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c413" escape="true" name="cero:PrivatePlacementWarrantsTableTextBlock" id="ixv-29708"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Note 4 &#8212; Private Placement Warrants</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">On October&#160;8, 2021,
simultaneously with the consummation of the IPO, the Company consummated the issuance and sale (&#8220;Private Placement&#8221;) of the
Private Placement Units in a private placement transaction at a price of $<ix:nonFraction contextRef="c468" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:SharesIssuedPricePerShare" scale="0" unitRef="usdPershares" id="ixv-36037">10.00</ix:nonFraction> per Private Placement Unit, generating gross proceeds
of $<ix:nonFraction contextRef="c469" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromIssuanceOfPrivatePlacement" scale="0" unitRef="usd" id="ixv-36038">8,850,000</ix:nonFraction>. The Private Placement Units were purchased by Cantor (<ix:nonFraction contextRef="c470" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodSharesPurchaseOfAssets" scale="0" unitRef="shares" id="ixv-36039">155,000</ix:nonFraction> Units), CCM (<ix:nonFraction contextRef="c471" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodSharesPurchaseOfAssets" scale="0" unitRef="shares" id="ixv-36040">30,004</ix:nonFraction> Units) and the&#160;Sponsor (<ix:nonFraction contextRef="c472" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodSharesPurchaseOfAssets" scale="0" unitRef="shares" id="ixv-36041">699,996</ix:nonFraction>
Units). Each whole Private Placement Unit consists of one Private Placement Share and one-half of a redeemable warrant (&#8220;Private
Placement Warrant&#8221;). Each whole&#160;Private Placement Warrant will be exercisable to purchase one share of Class&#160;A common
stock at a price of $<ix:nonFraction contextRef="c428" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:CommonStockDividendsPerShareCashPaid" scale="0" unitRef="usdPershares" id="ixv-36042">11.50</ix:nonFraction> per share, subject to adjustment. A portion of the proceeds from the Private Placement Units was added to the
proceeds from the IPO to be held in the Trust Account. If the Company does not complete a business combination within the Combination
Period, the proceeds from the sale of the Private Placement Units will be used to fund the redemption of the Public Shares (subject to
the requirements of applicable law), and the Private Placement Units and all underlying securities will be worthless.</p></ix:nonNumeric><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->40<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PHOENIX BIOTECH ACQUISITION CORP.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>DECEMBER 31, 2023</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c413" continuedAt="_RelatedPartyTransactionsDisclosureTextBlock-c413_cont_1" escape="true" name="us-gaap:RelatedPartyTransactionsDisclosureTextBlock" id="ixv-29738"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Note 5 &#8212; Related Party Transactions</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Founder Shares</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">On September&#160;18, 2021,
the Sponsor provided funds to pay for certain costs totaling $<ix:nonFraction contextRef="c473" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromRelatedPartyDebt" scale="0" unitRef="usd" id="ixv-36043">25,000</ix:nonFraction> on behalf of the Company as consideration for <ix:nonFraction contextRef="c474" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodSharesNewIssues" scale="0" unitRef="shares" id="ixv-36044">4,598,750</ix:nonFraction> Founder Shares.
Later in&#160;September 2021, the Company effected a <ix:nonFraction contextRef="c475" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:CommonStockDividendsPerShareDeclared" scale="0" unitRef="usdPershares" id="ixv-36045">0.017</ix:nonFraction> for <ix:nonFraction contextRef="c476" decimals="0" format="ixt:num-dot-decimal" name="cero:NumberOfDividends" scale="0" unitRef="pure" id="ixv-36046">1</ix:nonFraction> stock dividend for each Founder Share outstanding, and, as a result,
the Sponsor held <ix:nonFraction contextRef="c477" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:StockDividendsShares" scale="0" unitRef="shares" id="ixv-36047">4,679,125</ix:nonFraction> Founder Shares following the stock dividend. As a result, the Company&#8217;s shares have been retroactively
adjusted for this stock dividend; however, due to the shares being closely held the corresponding earnings have not been capitalized from
retained earnings. The Sponsor agreed to forfeit up to <ix:nonFraction contextRef="c478" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodSharesShareBasedCompensationForfeited" scale="0" unitRef="shares" id="ixv-36048">592,875</ix:nonFraction> Founder Shares to the extent that the 45-day over-allotment option was
not exercised in full by the underwriter. Since the underwriter exercised the over-allotment option only in part, the Sponsor forfeited
<ix:nonFraction contextRef="c479" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodSharesShareBasedCompensation" scale="0" unitRef="shares" id="ixv-36049">82,875</ix:nonFraction> Founder Shares.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">The Sponsor has agreed, subject
to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earliest of: (a)&#160;one year after the completion
of a business combination and (b)&#160;subsequent to a business combination, (x)&#160;if the closing price of the shares of Class&#160;A
common stock equals or exceeds $<ix:nonFraction contextRef="c478" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:CommonStockConvertibleConversionPriceIncrease" scale="0" unitRef="usdPershares" id="ixv-36050">12.00</ix:nonFraction> per share (as adjusted) for any <ix:nonNumeric contextRef="c413" format="ixt-sec:durday" name="cero:TransferAssignOrSellAnySharesOrWarrantsAfterCompletionOfInitialBusinessCombinationThresholdTradingDays" id="ixv-36051">20</ix:nonNumeric> trading days within any&#160;<ix:nonNumeric contextRef="c478" format="ixt-sec:durday" name="cero:TransferAssignOrSellAnySharesOrWarrantsAfterCompletionOfInitialBusinessCombinationThresholdConsecutiveTradingDays" id="ixv-36052">30</ix:nonNumeric>-trading&#160;day period commencing
at least <ix:nonNumeric contextRef="c478" format="ixt-sec:durday" name="cero:ThresholdPeriodAfterBusinessCombinationInWhichSpecifiedTradingDaysWithinAnySpecifiedTradingDayPeriodCommences" id="ixv-36053">150</ix:nonNumeric>&#160;days after a business combination, or (y)&#160;the date on which the Company completes a liquidation, merger, share
exchange or other similar transaction that results in all of the Public Stockholders having the right to exchange their shares of Class&#160;A
common stock for cash, securities or other property.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">On July 3, 2023, the Sponsor
delivered a notice of conversion of an aggregate of <ix:nonFraction contextRef="c480" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ConversionOfStockSharesConverted1" scale="0" unitRef="shares" id="ixv-36054">4,596,250</ix:nonFraction> Founder Shares into an equal number of shares of Class A common stock. Such
Founder Shares were subsequently converted into Class B common stock.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Related Party Loans</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">On June&#160;18, 2021, the
Sponsor agreed to loan the Company an aggregate of up to $<ix:nonFraction contextRef="c481" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentFaceAmount" scale="0" unitRef="usd" id="ixv-36055">300,000</ix:nonFraction> to cover expenses related to the IPO pursuant to a promissory note which
was amended on September&#160;10, 2021 (as amended, the &#8220;Note&#8221;). This loan is non-interest-bearing. There was no balance on
the Note as of December 31, 2023 and 2022.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">In addition, in order to
finance transaction costs in connection with a business combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company&#8217;s
officers and directors may, but are not obligated to, loan the Company funds as may be required (&#8220;Working Capital Loans&#8221;).
If the Company completes a business combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account
released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the
event that a business combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the
Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. The Working Capital
Loans will either be repaid upon consummation of a business combination, without interest, or, at the lender&#8217;s discretion, up to
$<ix:nonFraction contextRef="c482" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentFaceAmount" scale="6" unitRef="usd" id="ixv-36056">1.5</ix:nonFraction>&#160;million of such Working Capital Loans may be convertible into units of the post business combination entity at a price of $<ix:nonFraction contextRef="c482" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentConvertibleConversionPrice1" scale="0" unitRef="usdPershares" id="ixv-36057">10.00</ix:nonFraction>
per unit. The units would be identical to the Private Placement Units. On December&#160;13, 2022, the Company entered into a promissory
note with the Sponsor. In order to fund ongoing operations, the Sponsor will loan up to $<ix:nonFraction contextRef="c483" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentFaceAmount" scale="0" unitRef="usd" id="ixv-36058">1,500,000</ix:nonFraction> to the Company.&#160;The Promissory
Note does not bear interest and matures upon the earlier of (a)&#160;the closing of an initial business combination and (b)&#160;the Company&#8217;s
liquidation. In the event that the Company does not consummate an initial business combination, the Promissory Note will be repaid only
from amounts remaining outside of the Trust Account, if any. On December 8, 2023, the Company and the Lender amended the Promissory Note
to increase the aggregate principal amount of the Promissory Note from $<ix:nonFraction contextRef="c484" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InvestmentOwnedBalancePrincipalAmount" scale="0" unitRef="usd" id="ixv-36059">1,500,000</ix:nonFraction> to $<ix:nonFraction contextRef="c485" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InvestmentOwnedBalancePrincipalAmount" scale="0" unitRef="usd" id="ixv-36060">1,600,000</ix:nonFraction>. All other material terms of the Promissory
Note remain in full force and effect.&#160;On May&#160;8, 2023, June 9, 2023, September 12, 2023 and December 18, 2023, the sponsor loaned
the company $<ix:nonFraction contextRef="c433" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NotesAndLoansPayable" scale="0" unitRef="usd" id="ixv-36061">250,000</ix:nonFraction>, $<ix:nonFraction contextRef="c486" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NotesAndLoansPayable" scale="0" unitRef="usd" id="ixv-36062">275,000</ix:nonFraction>, $<ix:nonFraction contextRef="c487" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NotesAndLoansPayable" scale="0" unitRef="usd" id="ixv-36063">220,000</ix:nonFraction> and $<ix:nonFraction contextRef="c488" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NotesAndLoansPayable" scale="0" unitRef="usd" id="ixv-36064">160,000</ix:nonFraction> under the Promissory Note in connection with extensions of the Company&#8217;s liquidation
date, respectively. As of December 31, 2023 and 2022, there was $<ix:nonFraction contextRef="c422" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NotesAndLoansPayable" scale="0" unitRef="usd" id="ixv-36065">1,555,000</ix:nonFraction> and $<ix:nonFraction contextRef="c455" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NotesAndLoansPayable" scale="0" unitRef="usd" id="ixv-36066">650,000</ix:nonFraction> in borrowings under the Working Capital Loans,
respectively.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Consulting Services</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">The Company entered into
an agreement, commencing on the date of its listing on Nasdaq, to pay the spouse of the Company&#8217;s Chief Executive Officer a monthly
consulting fee of $<ix:nonFraction contextRef="c489" decimals="0" format="ixt:num-dot-decimal" name="cero:MonthlyConsultingFees" scale="0" unitRef="usd" id="ixv-36067">15,000</ix:nonFraction> for assisting the Company in identifying and evaluating potential acquisition targets. Upon completion of the
Company&#8217;s initial business combination or the Company&#8217;s liquidation, the Company&#8217;s will cease paying these monthly fees.
The payments ended on December 31, 2022 in connection with the approval of the Charter Amendment. For the year ended December 31, 2023,
$<ix:nonFraction contextRef="c413" decimals="0" format="ixt:num-dot-decimal" name="cero:OthersCostsIncurredGross" scale="0" unitRef="usd" id="ixv-36068">0</ix:nonFraction> has been incurred under this agreement. For the year ended December 31, 2022, $<ix:nonFraction contextRef="c461" decimals="0" format="ixt:num-dot-decimal" name="cero:OthersCostsIncurredGross" scale="0" unitRef="usd" id="ixv-36069">180,000</ix:nonFraction> has been incurred under this agreement, respectively.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Advisory Services</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">The Company engaged CCM,
an affiliate of the Company, the Sponsor and/or certain of its directors and officers, to provide consulting and advisory services in
connection with the IPO, for which it was entitled to a fee in an amount equal to $<ix:nonFraction contextRef="c413" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RelatedPartyTaxExpenseDueToAffiliatesDeferred" scale="0" unitRef="usd" id="ixv-36070">465,000</ix:nonFraction>, which was paid to CCM upon the closing of
the IPO, and $<ix:nonFraction contextRef="c413" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:NoninterestExpenseInvestmentAdvisoryFees" scale="0" unitRef="usd" id="ixv-36071">1,162,500</ix:nonFraction>, which will be paid to CCM upon the closing of the Company&#8217;s initial business combination. Affiliates of
CCM have and manage investment vehicles with a passive investment in the Sponsor.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric><div>

</div><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PHOENIX BIOTECH ACQUISITION CORP.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>DECEMBER 31, 2023</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><i>&#160;</i></p><div>

</div><ix:continuation id="_RelatedPartyTransactionsDisclosureTextBlock-c413_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Support Services</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">The Company entered into
an agreement, commencing on the date of its listing on Nasdaq through the earlier of the consummation of a business combination and the
Company&#8217;s liquidation, to pay an affiliate of the Sponsor a monthly fee of $<ix:nonFraction contextRef="c413" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RelatedPartyTransactionAmountsOfTransaction" scale="0" unitRef="usd" id="ixv-36072">20,000</ix:nonFraction> for office space, secretarial and administrative
services. Payments under the agreement were suspended on December 31, 2022 and reinstated on March 31, 2023. For the year ended December
31, 2023, $<ix:nonFraction contextRef="c413" decimals="0" format="ixt:num-dot-decimal" name="cero:ConsultingFeeIncurredUnderThisAgreement" scale="0" unitRef="usd" id="ixv-36073">200,000</ix:nonFraction> has been incurred under this agreement. For the year ended December 31, 2022, $<ix:nonFraction contextRef="c461" decimals="0" format="ixt:num-dot-decimal" name="cero:ConsultingFeeIncurredUnderThisAgreement" scale="0" unitRef="usd" id="ixv-36074">240,000</ix:nonFraction> has been incurred under this
agreement, respectively. As of December 31, 2023, there was a $<ix:nonFraction contextRef="c490" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:LettersOfCreditOutstandingAmount" scale="0" unitRef="usd" id="ixv-36075">75,000</ix:nonFraction> outstanding balance owed to the Sponsor.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c413" continuedAt="_CommitmentsAndContingenciesDisclosureTextBlock-c413_cont_1" escape="true" name="us-gaap:CommitmentsAndContingenciesDisclosureTextBlock" id="ixv-29804"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Note 6 &#8212; Commitments and Contingencies</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Registration Rights</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">Pursuant to a registration
rights agreement entered into on October&#160;5, 2021, the holders of the Founder Shares, Private Placement Warrants and warrants that
may be issued upon conversion of Working Capital Loans (and any Class&#160;A common stock issuable upon the exercise of the Private Placement
Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares) are entitled
to registration rights, requiring the Company to register such securities and any other securities of the Company acquired by them prior
to the consummation of a business combination for resale. The holders of these securities are entitled to make up to three demands, excluding
short form demands, that the Company register such securities. In addition, the holders have certain &#8220;piggy-back&#8221; registration
rights with respect to registration statements filed subsequent to the completion of a business combination. The registration rights agreement
does not contain liquidated damages or other cash settlement provisions resulting from delays in registering the securities. The Company
will bear the expenses incurred in connection with the filing of any such registration statements.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>&#160;</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Underwriting Agreement</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">The Company granted the underwriter
a&#160;45-day&#160;option from the date of the final prospectus relating to the IPO to purchase up to <ix:nonFraction contextRef="c491" decimals="0" format="ixt:num-dot-decimal" name="cero:UnitsIssuedDuringPeriodSharesNewIssues" scale="0" unitRef="shares" id="ixv-36076">2,325,000</ix:nonFraction> additional Units to cover
over-allotments, if any, at the IPO price less the underwriting discounts and commissions. On October&#160;8, 2021, the underwriter partially
exercised its over-allotment option and purchased <ix:nonFraction contextRef="c492" decimals="INF" format="ixt:num-dot-decimal" name="cero:NumberOfUnitsPurchased" scale="0" unitRef="shares" id="ixv-36077">2,000,000</ix:nonFraction> units at $<ix:nonFraction contextRef="c493" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:SharesIssuedPricePerShare" scale="0" unitRef="usdPershares" id="ixv-36078">10.00</ix:nonFraction> per unit.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">The underwriter was paid
a cash underwriting discount of $<ix:nonFraction contextRef="c494" decimals="2" format="ixt:num-dot-decimal" name="cero:UnderwritingDiscountPerUnit" scale="0" unitRef="usdPershares" id="ixv-36079">0.20</ix:nonFraction> per unit, or $<ix:nonFraction contextRef="c495" decimals="0" format="ixt:num-dot-decimal" name="cero:UnderwriterCashDiscount" scale="0" unitRef="usd" id="ixv-36080">3,100,000</ix:nonFraction> in the aggregate at the closing of the IPO, of which $<ix:nonFraction contextRef="c422" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DepositAssetsPresentValueOfExpectedRecoveries" scale="0" unitRef="usd" id="ixv-36081">465,000</ix:nonFraction> was reimbursed
to the Company to pay for additional advisors. The underwriter agreed to defer any additional fees related to the exercise of the over-allotment
option until the Company completes a business combination. As such, $<ix:nonFraction contextRef="c418" decimals="0" format="ixt:num-dot-decimal" name="cero:UnderwritingFees" scale="0" unitRef="usd" id="ixv-36082">400,000</ix:nonFraction> of additional underwriting fees related to the over-allotment
have been deferred. In addition, the underwriter is entitled to&#160;deferred underwriting commissions of $<ix:nonFraction contextRef="c422" decimals="2" format="ixt:num-dot-decimal" name="cero:DeferredUnderwritingCommissionsPerUnit" scale="0" unitRef="usdPershares" id="ixv-36083">0.50</ix:nonFraction> per unit, or $<ix:nonFraction contextRef="c413" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InvestmentBankingAdvisoryBrokerageAndUnderwritingFeesAndCommissions" scale="0" unitRef="usd" id="ixv-36084">8,750,000</ix:nonFraction>
($<ix:nonFraction contextRef="c422" decimals="0" format="ixt:num-dot-decimal" name="cero:DeferredUnderwritingCommissionsIncludingFees" scale="0" unitRef="usd" id="ixv-36085">9,150,000</ix:nonFraction> in the aggregate when including the $<ix:nonFraction contextRef="c421" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:EquityMethodInvestmentAggregateCost" scale="0" unitRef="usd" id="ixv-36086">400,000</ix:nonFraction> noted above) from the closing of the IPO. The deferred fee will become payable
to the underwriter from the amounts held in the Trust Account solely in the event that the Company completes a business combination, subject
to the terms of the underwriting agreement.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 10.1pt"><i>&#160;</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Business Combination Agreement</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">On June&#160;4, 2023, the
Company entered into the Business Combination Agreement.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">At the Effective Time, (i)&#160;each
outstanding share of CERo common stock will be cancelled and converted into (a)&#160;the right to receive a number of shares of Class&#160;A
common stock, equal to $<ix:nonFraction contextRef="c496" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:TemporaryEquityLiquidationPreference" scale="0" unitRef="usd" id="ixv-36087">50,000,000</ix:nonFraction>,&#160;<i>minus</i>&#160;the Aggregate Liquidation Preference,&#160;<i>divided</i>&#160;by the Fully
Diluted Company Capitalization,&#160;<i>divided</i>&#160;by the Exchange Ratio and (b)&#160;the right to receive Earnout Shares; (ii)&#160;each
outstanding CERo option will be converted into an option to purchase a number of shares of Class&#160;A common stock, equal to (A)&#160;the
number of shares of CERo common stock subject to such option immediately prior to the Effective Time,&#160;<i>multiplied</i>&#160;by (B)&#160;the
Exchange Ratio, at an exercise price per share equal to the current exercise price per share for such option divided by the Exchange Ratio;
in each case, rounded down to the nearest whole share, and rounded up to the nearest whole cent in the case of the exercise price of the
CERo options; (iii)&#160;each outstanding share of CERo preferred stock, will be converted into a number of shares of Class&#160;A common
stock, equal to the number of shares of Class&#160;A common stock obtained by&#160;<i>dividing</i>&#160;the liquidation preference thereof
by $<ix:nonFraction contextRef="c497" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EarningsPerShareDilutedProFormaAdjustment" scale="0" unitRef="usdPershares" id="ixv-36088">10.00</ix:nonFraction> and the contingent right to receive such holder&#8217;s&#160;Earn-Out&#160;Pro Rata Portion, and (iv)&#160;each CERo warrant
outstanding as of immediately prior to the Effective Time will be converted into a warrant to acquire a number of shares of Class&#160;A
common stock equal to the number of shares of CERo preferred stock subject to the corresponding warrant immediately prior to the Effective
Time,&#160;<i>multiplied</i>&#160;by the Aggregate Liquidation Preference of such underlying shares of CERo preferred stock, and&#160;<i>divided</i>&#160;by
$<ix:nonFraction contextRef="c496" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:SharesIssuedPricePerShare" scale="0" unitRef="usdPershares" id="ixv-36089">10.00</ix:nonFraction>, with the exercise price per share for such warrant equal to (A)&#160;the current aggregate exercise price of such warrant (the
current exercise price per share of CERo preferred stock applicable to the corresponding warrant immediately prior to the Effective Time,&#160;<i>multiplied</i>&#160;by
the number of shares of CERo preferred stock issuable upon exercise thereof),&#160;<i>divided</i>&#160;by (B)&#160;the number of shares
of Class&#160;A common stock issuable upon exercise thereof. Subject to certain exceptions, such terms and conditions applicable to a
New CERo warrant will be the same terms and conditions as were applicable to a CERo warrant immediately prior to the Effective Time. The
Company will issue an aggregate of approximately <ix:nonFraction contextRef="c498" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesIssued" scale="6" unitRef="shares" id="ixv-36090">5.0</ix:nonFraction>&#160;million shares of Class&#160;A common stock to the holders of CERo common stock
and CERo preferred stock as consideration in the Business Combination.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 10.1pt"><i>&#160;</i></p></ix:nonNumeric><div>

</div><div>


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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->42<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;<i>&#160;</i></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PHOENIX BIOTECH ACQUISITION CORP.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>DECEMBER 31, 2023</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 10.1pt"><i>&#160;</i></p><div>

</div><ix:continuation id="_CommitmentsAndContingenciesDisclosureTextBlock-c413_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Sponsor Support Agreement</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">In connection with the execution
of the Business Combination Agreement, the Sponsor, as the sole holder of the Class&#160;B common stock, and each of the Company&#8217;s
officers and directors entered into a support agreement with the Company and CERo (the &#8220;Sponsor Support Agreement&#8221;). Under
the Sponsor Support Agreement, the Sponsor agreed to vote, at any meeting of the stockholders of the Company and in any action by written
consent of the stockholders of the Company, all of its shares of Class&#160;B common stock (together with any other equity securities
of the Company that it holds of record or beneficially, as of the date of the Sponsor Support Agreement, or of which it acquires record
or beneficial ownership after the date thereof, the &#8220;Subject Company Shares&#8221;) (i) in favor of (a)&#160;the Business Combination
Agreement and the transactions contemplated thereby and (b)&#160;the other proposals that the Company and CERo agreed in the Business
Combination Agreement shall be submitted at such meeting for approval by the Company&#8217;s stockholders (together with the proposal
to obtain the Company Stockholder Approval, the &#8220;Required Transaction Proposals&#8221;) and (ii)&#160;against any proposal that
conflicts or materially impedes or interferes with any Required Transaction Proposals or that would adversely affect or delay the Business
Combination. The Sponsor Support Agreement also prohibits the Sponsor from, among other things and subject to certain exceptions, transferring
any Subject Company Shares held by the Sponsor or taking any action that would have the effect of preventing or materially delaying the
Sponsor from performing its obligations under the Sponsor Support Agreement, until the earlier of the Closing or the termination of the
Sponsor Support Agreement according to its terms. On July 3, 2023, the Sponsor delivered notice of conversion of an aggregate of <ix:nonFraction contextRef="c499" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesIssued" scale="0" unitRef="shares" id="ixv-36091">4,596,250</ix:nonFraction>
shares of Class B common stock into an equal number of shares of Class A common stock. Following the Conversion, the Sponsor held an aggregate
of <ix:nonFraction contextRef="c500" decimals="0" format="ixt:num-dot-decimal" name="cero:TemporaryEquitySubjectToRedemption" scale="0" unitRef="shares" id="ixv-36092">5,296,246</ix:nonFraction> shares of Class A common stock, all of which are subject to the Sponsor Support Agreement.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>CERo Support Agreements</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">In connection with the execution
of the Business Combination Agreement, certain CERo stockholders (the &#8220;CERo Supporting Stockholders&#8221;) entered into support
agreements with CERo (the &#8220;CERo Support Agreements&#8221;). Under the CERo Support Agreements, each CERo Supporting Stockholder
agreed as promptly as practicable following the time at which the Registration Statement/Proxy Statement shall have been declared effective
and made available to such CERo Supporting Stockholders, to execute and deliver a written consent with respect to all outstanding shares
of CERo common stock and CERo preferred stock held by such CERo Supporting Stockholder (the &#8220;Subject CERo Shares&#8221;) approving
the Business Combination Agreement and the transactions contemplated thereby (including the Business Combination). In addition to the
foregoing, each CERo Supporting Stockholder agreed that, at any meeting of the holders of CERo capital stock, each such CERo Supporting
Stockholder will appear at the meeting, in person or by proxy, and cause its Subject CERo Shares to be counted as present thereat for
purposes of calculating a quorum and voted (i)&#160;to approve and adopt the Business Combination Agreement, the transactions contemplated
thereby (including the Business Combination), and any other matters necessary or reasonably requested by CERo for consummation of the
Business Combination, and (ii)&#160;against any proposal that conflicts or materially impedes or interferes with, or would adversely affect
or delay, the consummation of the transactions contemplated by the Business Combination Agreement (including the Business Combination).</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><ix:nonNumeric contextRef="c413" continuedAt="_StockholdersEquityNoteDisclosureTextBlock-c413_cont_1" escape="true" name="us-gaap:StockholdersEquityNoteDisclosureTextBlock" id="ixv-29880"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Note 7 &#8212; Stockholders&#8217; Deficit</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>&#160;</i></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i>Common Stock</i></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><b><i>Class&#160;A common
stock</i></b> &#8212; The Company is authorized to issue <ix:nonFraction contextRef="c442" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesAuthorized" scale="0" unitRef="shares" id="ixv-36093">60,000,000</ix:nonFraction> shares of Class&#160;A common stock with a par value of $<ix:nonFraction contextRef="c442" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:CommonStockParOrStatedValuePerShare" scale="0" unitRef="usdPershares" id="ixv-36094">0.0001</ix:nonFraction> per
share. As of December 31, 2023 and 2022, there were <ix:nonFraction contextRef="c442" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesOutstanding" scale="0" unitRef="shares" id="ixv-36095"><ix:nonFraction contextRef="c442" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesIssued" scale="0" unitRef="shares" id="ixv-36096">5,481,250</ix:nonFraction></ix:nonFraction> and <ix:nonFraction contextRef="c429" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesIssued" scale="0" unitRef="shares" id="ixv-36097"><ix:nonFraction contextRef="c429" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesOutstanding" scale="0" unitRef="shares" id="ixv-36098">885,000</ix:nonFraction></ix:nonFraction> shares of Class&#160;A common stock issued and outstanding (excluding
<ix:nonFraction contextRef="c422" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:TemporaryEquitySharesAuthorized" scale="0" unitRef="shares" id="ixv-36099">764,957</ix:nonFraction> and <ix:nonFraction contextRef="c455" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:TemporaryEquitySharesAuthorized" scale="0" unitRef="shares" id="ixv-36100">1,288,298</ix:nonFraction> shares subject to possible redemption), respectively.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><b><i>Class&#160;B common
stock</i></b> &#8212; The Company is authorized to issue <ix:nonFraction contextRef="c501" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesAuthorized" scale="0" unitRef="shares" id="ixv-36101">10,000,000</ix:nonFraction> shares of Class&#160;B common stock with a par value of $<ix:nonFraction contextRef="c501" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:CommonStockParOrStatedValuePerShare" scale="0" unitRef="usdPershares" id="ixv-36102">0.0001</ix:nonFraction> per
share. Holders of Class&#160;B common stock are entitled to <ix:nonNumeric contextRef="c502" name="us-gaap:CommonStockVotingRights" id="ixv-36103">one</ix:nonNumeric> vote for each share. On July 3, 2023, the Sponsor delivered notice of
conversion of an aggregate of <ix:nonFraction contextRef="c503" decimals="0" format="ixt:num-dot-decimal" name="cero:ConversionOfAggregateShare" scale="0" unitRef="shares" id="ixv-36104">4,596,250</ix:nonFraction> shares of Class B common stock into an equal number of shares of Class A common stock. As of December
31, 2023 and 2022, there were <ix:nonFraction contextRef="c504" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesIssued" scale="0" unitRef="shares" id="ixv-36105"><ix:nonFraction contextRef="c504" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesOutstanding" scale="0" unitRef="shares" id="ixv-36106">0</ix:nonFraction></ix:nonFraction> and <ix:nonFraction contextRef="c501" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesIssued" scale="0" unitRef="shares" id="ixv-36107"><ix:nonFraction contextRef="c501" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesOutstanding" scale="0" unitRef="shares" id="ixv-36108">4,596,250</ix:nonFraction></ix:nonFraction> shares of Class&#160;B common stock issued and outstanding.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">Prior to the consummation
of an initial business combination, only holders of shares of Class&#160;B common stock will have the right to vote on the election of
directors. Holders of shares of Class&#160;A common stock and shares of Class&#160;B common stock will vote together as a single class
on all other matters submitted to a vote of stockholders.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p></ix:nonNumeric><div>

</div><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PHOENIX BIOTECH ACQUISITION CORP.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>DECEMBER 31, 2023</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><ix:continuation id="_StockholdersEquityNoteDisclosureTextBlock-c413_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><b><i>Preferred stock</i></b>
&#8212; The&#160;Company is authorized to issue&#160;<ix:nonFraction contextRef="c422" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockSharesAuthorized" scale="0" unitRef="shares" id="ixv-36109">1,000,000</ix:nonFraction>&#160;shares of preferred stock with such designations, voting and other
rights and preferences as may be determined from time to time by the Company&#8217;s board of directors. As of December 31, 2023 and 2022,
there were no shares of preferred stock issued or outstanding.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><b><i>&#160;</i></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify"><b><i>Warrants &#8212;</i></b>
At December 31, 2023 and 2022, there were <ix:nonFraction contextRef="c505" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightOutstanding" scale="0" unitRef="shares" id="ixv-36110"><ix:nonFraction contextRef="c506" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightOutstanding" scale="0" unitRef="shares" id="ixv-36111">8,750,000</ix:nonFraction></ix:nonFraction> Public Warrants and <ix:nonFraction contextRef="c507" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightOutstanding" scale="0" unitRef="shares" id="ixv-36112"><ix:nonFraction contextRef="c508" decimals="INF" format="ixt:num-dot-decimal" name="us-gaap:ClassOfWarrantOrRightOutstanding" scale="0" unitRef="shares" id="ixv-36113">442,500</ix:nonFraction></ix:nonFraction> Private Placement Warrants outstanding. The Public Warrants
will become exercisable&#160;30 days after the completion of a business combination. No warrants will be exercisable for cash unless the
Company has an effective and current registration statement covering the common stock issuable upon exercise of the warrants and a current
prospectus relating to such common stock.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">Notwithstanding the foregoing,
if a registration statement covering the common stock issuable upon exercise of the Public Warrants is not effective within a specified
period following the consummation of a business combination, warrant holders may, until such time as there is an effective registration
statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants
on a cashless basis pursuant to the exemption provided by Section&#160;3(a)(9) of the Securities Act, provided that such exemption is
available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless
basis. The Public Warrants will expire <ix:nonNumeric contextRef="c422" format="ixt-sec:durwordsen" name="us-gaap:WarrantsAndRightsOutstandingTerm" id="ixv-36114">five years</ix:nonNumeric> after the completion of a business combination or earlier upon redemption or liquidation.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">Once the warrants become
exercisable, the Company may redeem the Public Warrants:</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">in
whole and not in part;</span></td>
</tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"> <tr style="vertical-align: top"> <td style="width: 0.25in">&#160;</td> <td style="width: 0.25in; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#9679;</span></td> <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">upon not less than <ix:nonNumeric contextRef="c413" format="ixt-sec:durday" name="cero:NoticePeriodToBeGivenPriorToRedemption" id="ixv-36116">30</ix:nonNumeric> days&#8217; prior written notice of redemption;</span></td></tr> </table>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%">
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  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">If the Company calls the
Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do
so on a &#8220;cashless basis,&#8221; as described in the warrant agreement.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">The Private Placement Warrants
are identical to the Public Warrants underlying the Units sold in the IPO, except that the Private Placement Warrants and the common stock
issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable, or salable until after the completion
of a business combination, subject to certain limited exceptions. The Private Placement Warrants will be redeemable by the Company and
exercisable by such holders on the same basis as the Public Warrants.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">The exercise price and number
of shares of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a
stock dividend, extraordinary dividend or recapitalization, reorganization, merger, or consolidation. However, the warrants will not be
adjusted for issuances of common stock at a price below their respective exercise prices, other than as set forth below. Additionally,
in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a business combination
within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any
of such funds with respect to their warrants, nor will they receive any distribution from the Company&#8217;s assets held outside of the
Trust Account with respect to such warrants. Accordingly, the warrants may expire worthless.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">In addition, if the Company
issues additional common stock or equity-linked securities for capital raising purposes in connection with the closing of a business combination
at an issue price or effective issue price of less than $<ix:nonFraction contextRef="c512" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:SharesIssuedPricePerShare" scale="0" unitRef="usdPershares" id="ixv-36120">9.20</ix:nonFraction> per share of common stock (with such issue price or effective issue price
to be determined in good faith by the Company&#8217;s board of directors, and in the case of any such issuance to the Initial Stockholders
or their affiliates, without taking into account any Founder Shares held by them prior to such issuance) (the &#8220;Newly Issued Price&#8221;),
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available for the funding of a business combination on the date of the consummation of a business combination (net of redemptions), and
(z)&#160;the volume weighted-average trading price of the Company&#8217;s common stock during the&#160;20-trading-day&#160;period starting
on the trading day prior to the day on which the Company consummates a business combination (such price, the &#8220;Market Value&#8221;)
is below $<ix:nonFraction contextRef="c512" decimals="2" format="ixt:num-dot-decimal" name="cero:VolumeWeightedAveragePricePerShare" scale="0" unitRef="usdPershares" id="ixv-36122">9.20</ix:nonFraction> per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to <ix:nonFraction contextRef="c512" decimals="2" format="ixt:num-dot-decimal" name="cero:AdjustedExercisePriceOfWarrantsPercentage" scale="-2" unitRef="pure" id="ixv-36123">115</ix:nonFraction>% of the greater
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


</div><!-- Field: Page; Sequence: 244; Value: 24 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->44<!-- Field: /Sequence --></span></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PHOENIX BIOTECH ACQUISITION CORP.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>DECEMBER 31, 2023</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c413" escape="true" name="us-gaap:FairValueDisclosuresTextBlock" id="ixv-30010"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Note 8 &#8212; Fair Value Measurements</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">The fair value of the Company&#8217;s
financial assets and liabilities reflects management&#8217;s estimate of amounts that the Company would have received in connection with
the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants
at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the
use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions
about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities
based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">Level&#160;1: Quoted prices
in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for
the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">Level&#160;2: Observable
inputs other than Level&#160;1 inputs. Examples of Level&#160;2 inputs include quoted prices in active markets for similar assets or liabilities
and quoted prices for identical assets or liabilities in markets that are not active.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">Level&#160;3: Unobservable
inputs based on the Company&#8217;s assessment of the assumptions that market participants would use in pricing the asset or liability.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">At December 31, 2023, the
assets held in the Trust Account were held in money market funds. All of the Company&#8217;s investments held in the Trust Account are
classified as trading securities.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">The following table presents
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>December 31, 2023</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

<ix:continuation id="_ScheduleOfFairValueAssetsAndLiabilitiesMeasuredOnRecurringBasisTableTextBlock-c413_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom">
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    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table></ix:continuation></ix:nonNumeric><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c413" continuedAt="_SubsequentEventsTextBlock-c413_cont_1" escape="true" name="us-gaap:SubsequentEventsTextBlock" id="ixv-30095"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Note 9 &#8212; Subsequent Events</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">The Company evaluated subsequent
events and transactions that occurred up to the date the financial statements were issued. Based upon this review, other than described
below, the Company did not identify any other subsequent events that would have required adjustment or disclosure in the financial statements.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">On January 3, 2024, the Company
held a special meeting of stockholders (the &#8220;Third Special Meeting&#8221;). At the Third Special Meeting, the Company&#8217;s stockholders
approved an amendment (the &#8220;Third IMTA Amendment&#8221;) to the IMTA, as amended by the First IMTA Amendment and the Second IMTA
Amendment, and an amendment (the &#8220;Third Charter Amendment&#8221;) to the Charter, as amended by the First Charter Amendment and
the Second Charter Amendment, to extend the business combination period up to three times for one month each time (the &#8220;Third Extension&#8221;).</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">In connection with the approval
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requiring the Company to make a series of payments of an aggregate of $<ix:nonFraction contextRef="c519" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PaymentsForDeposits" scale="0" unitRef="usd" id="ixv-36129">128,133</ix:nonFraction> for an aggregate $<ix:nonFraction contextRef="c520" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:SharesIssuedPricePerShare" scale="0" unitRef="usdPershares" id="ixv-36130">11.02</ix:nonFraction> per redeemed share. As a result,
following satisfaction of such redemptions, the Company had <ix:nonFraction contextRef="c521" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesOutstanding" scale="0" unitRef="shares" id="ixv-36131">6,234,582</ix:nonFraction> shares of Class A common stock outstanding, of which (i) <ix:nonFraction contextRef="c519" decimals="0" format="ixt:num-dot-decimal" name="cero:PublicShares" scale="0" unitRef="shares" id="ixv-36132">753,332</ix:nonFraction>
were Public Shares, which were entitled to receive a pro rata portion of the remaining funds in the Company&#8217;s Trust Account in connection
with its initial Business Combination, a liquidation or certain other events, (ii) <ix:nonFraction contextRef="c522" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ConversionOfStockSharesConverted1" scale="0" unitRef="shares" id="ixv-36133">4,596,250</ix:nonFraction> were Class A common stock issued upon the
conversion of an equal number of shares of the Class B common stock, which did not have redemption rights, and (iii) <ix:nonFraction contextRef="c523" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SaleOfStockNumberOfSharesIssuedInTransaction" scale="0" unitRef="shares" id="ixv-36134">885,000</ix:nonFraction> were Private
Placement Shares, which did not have redemption rights. As a result of the deposit described above, such payments and accrual of interest,
the balance in the trust account as of the last extension payment was approximately $<ix:nonFraction contextRef="c524" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:DepositLiabilitiesAccruedInterest" scale="6" unitRef="usd" id="ixv-36135">8.4</ix:nonFraction> million.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p></ix:nonNumeric><div>

</div><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PHOENIX BIOTECH ACQUISITION CORP.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>DECEMBER 31, 2023</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in"><span style="font-size: 8pt">&#160;</span></p><div>

</div><ix:continuation continuedAt="_SubsequentEventsTextBlock-c413_cont_2" id="_SubsequentEventsTextBlock-c413_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Business Combination</i></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><span style="font-size: 8pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">On February 5, 2024, the
parties entered into Amendment No. 1 to the Business Combination Agreement to, among other things, (i) remove the minimum cash condition,
(ii) modify the stock-price based milestones such that (a) the trading price condition for the First Level Earnout Target shall be reset
from $<ix:nonFraction contextRef="c525" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockConvertibleConversionPrice" scale="0" unitRef="usdPershares" id="ixv-36136">12.50</ix:nonFraction> to <ix:nonFraction contextRef="c526" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentConvertibleThresholdPercentageOfStockPriceTrigger" scale="-2" unitRef="pure" id="ixv-36137">125</ix:nonFraction>% of the reset Conversion Price of the Series A Preferred Stock and (b) the trading price condition for the Second Level
Earnout Target shall be reset from $<ix:nonFraction contextRef="c527" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockConvertibleConversionPrice" scale="0" unitRef="usdPershares" id="ixv-36138">15.00</ix:nonFraction> to <ix:nonFraction contextRef="c528" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentConvertibleThresholdPercentageOfStockPriceTrigger" scale="-2" unitRef="pure" id="ixv-36139">150</ix:nonFraction>% of the reset Conversion Price of the Series A Preferred Stock, and (iii) increase the
aggregate number of shares of Class A common stock issuable to the stockholders of CERo in connection with the Business Combination from
<ix:nonFraction contextRef="c529" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesIssued" scale="0" unitRef="shares" id="ixv-36140">4,651,704</ix:nonFraction> shares to <ix:nonFraction contextRef="c530" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesIssued" scale="0" unitRef="shares" id="ixv-36141">5,000,000</ix:nonFraction> shares. Such number of shares is in addition to up to <ix:nonFraction contextRef="c531" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodSharesNewIssues" scale="0" unitRef="shares" id="ixv-36142">1,200,000</ix:nonFraction> shares issuable upon satisfaction of certain
earn-out conditions and <ix:nonFraction contextRef="c531" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodSharesStockOptionsExercised" scale="0" unitRef="shares" id="ixv-36143">382,651</ix:nonFraction> shares issuable upon exercise of rollover options or warrants.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><span style="font-size: 8pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">On February 8, 2024, the
Company held a special meeting of stockholders (the &#8220;Fourth Special Meeting&#8221;). At the Fourth Special Meeting, the Company&#8217;s
stockholders adopted and approved (i) the Business Combination Agreement, pursuant to which Merger Sub merged with and into CERo, with
CERo surviving as a wholly-owned subsidiary of the Company and approved the Business Combination and the other transactions and ancillary
documents contemplated by and required for the Business Combination; (ii) on a non-binding advisory basis, certain changes to the Charter,
including the name change to CERo Therapeutics Holdings, Inc., share authorizations, and others; (iii) the issuance of Class A common
stock to CERo stockholders pursuant to the Business Combination Agreement; (iv) the election of five directors; and (v) the 2024 Equity
Incentive Plan and the 2024 Employee Stock Purchase Plan, contingent of the consummation of the Business Combination.&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><span style="font-size: 8pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">In connection with the approval
of the Business Combination, holders of <ix:nonFraction contextRef="c532" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxExpenseFromStockOptionsExercised" scale="0" unitRef="usd" id="ixv-36144">671,285</ix:nonFraction> shares of Class A common stock, exercised redemption rights. As a result, following satisfaction
of such redemptions, we had <ix:nonFraction contextRef="c533" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockOtherSharesOutstanding" scale="0" unitRef="shares" id="ixv-36145">5,563,297</ix:nonFraction> shares of Class A common stock outstanding, of which (i) <ix:nonFraction contextRef="c534" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ExcessStockSharesIssued" scale="0" unitRef="shares" id="ixv-36146">82,047</ix:nonFraction> were shares of Class A common stock
issued to the public in our IPO, which shares of Class A common stock were entitled to receive a pro rata portion of the remaining funds
in our Trust Account in connection with its initial business combination, a liquidation or certain other events, (ii) <ix:nonFraction contextRef="c532" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ConversionOfStockSharesIssued1" scale="0" unitRef="shares" id="ixv-36147">4,596,250</ix:nonFraction> were shares
of Class A common stock issued upon the conversion of an equal number of shares of our Class B common stock acquired by Sponsor prior
to our IPO, which shares of Class A common stock did not have redemption rights, and (iii) <ix:nonFraction contextRef="c535" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SharesIssued" scale="0" unitRef="shares" id="ixv-36148">885,000</ix:nonFraction> were shares of Class A common stock
included in the private placement units acquired in the private placement by the Sponsor and other investors concurrent with our IPO,
which shares of Class A common stock did not have redemption rights. On February 14, 2024, we made a series of payments of an aggregate
of $<ix:nonFraction contextRef="c536" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:StockRedeemedOrCalledDuringPeriodValue" scale="0" unitRef="usd" id="ixv-36149">7,456,463.30</ix:nonFraction> to holders of redeemed Class A common stock (an aggregate of $<ix:nonFraction contextRef="c537" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:TemporaryEquityRedemptionPricePerShare" scale="0" unitRef="usdPershares" id="ixv-36150">11.11</ix:nonFraction> per redeemed share).</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><span style="font-size: 8pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">On February 13, 2024, the
parties entered into Amendment No. 2 to the Business Combination Agreement to create two additional pools of earnout shares of Class A
common stock, one pool of which contained <ix:nonFraction contextRef="c538" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:BusinessAcquisitionEquityInterestsIssuedOrIssuableNumberOfSharesIssued" scale="0" unitRef="shares" id="ixv-36151">875,000</ix:nonFraction> shares, which were fully vested at closing of the Business Combination and which were
issued as an offset to the agreement by Sponsor to forfeit an offsetting number of shares, and one pool of which will contain <ix:nonFraction contextRef="c539" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:BusinessAcquisitionEquityInterestsIssuedOrIssuableNumberOfSharesIssued" scale="0" unitRef="shares" id="ixv-36152">1,000,000</ix:nonFraction>
shares, which will be fully vested upon the achievement of certain regulatory milestone-based earnout targets and make certain other technical
changes to the timing and process for issuance of the <ix:nonFraction contextRef="c540" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:BusinessAcquisitionEquityInterestsIssuedOrIssuableNumberOfSharesIssued" scale="0" unitRef="shares" id="ixv-36153">1,200,000</ix:nonFraction> shares of Class A common stock subject to the other earn-out conditions
set forth in the Business Combination Agreement.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="font-size: 8pt">&#160;</span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">The Business Combination
closed on February 14, 2024, at which time the following occurred:</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><span style="font-size: 8pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1.</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Each
outstanding share of the Company&#8217;s preferred stock was converted into the number of shares of Class A common stock calculated by
dividing the liquidation preference by $<ix:nonFraction contextRef="c541" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:BusinessAcquisitionSharePrice" scale="0" unitRef="usdPershares" id="ixv-36154">10.00</ix:nonFraction>.</span></td>
</tr></table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><span style="font-size: 8pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"> <tr style="vertical-align: top"> <td style="width: 0.25in">&#160;</td> <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2.</span></td> <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Each outstanding share of the Company&#8217;s common stock was converted into the number of shares of Class A common stock calculated by multiplying each share by the Exchange Ratio. The Exchange Ratio of <ix:nonFraction contextRef="c537" decimals="6" format="ixt:num-dot-decimal" name="us-gaap:ForeignCurrencyExchangeRateTranslation1" scale="0" unitRef="pure" id="ixv-36155">0.064452</ix:nonFraction> was calculated by first subtracting the aggregate liquidation preference of outstanding preferred shares from $<ix:nonFraction contextRef="c542" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockValueOutstanding" scale="6" unitRef="usd" id="ixv-36156">50</ix:nonFraction> million, then dividing the result by the number of shares of the Company&#8217;s common stock outstanding and dividing by $<ix:nonFraction contextRef="c543" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:SharesIssuedPricePerShare" scale="0" unitRef="usdPershares" id="ixv-36157">10.00</ix:nonFraction> per share.</span></td></tr> </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><span style="font-size: 8pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top"> <td style="width: 24px">&#160;</td> <td style="width: 24px"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">3.</span></td> <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Each holder of the Company&#8217;s common stock received a pro rata portion of up to <ix:nonFraction contextRef="c544" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodSharesRestrictedStockAwardGross" scale="6" unitRef="shares" id="ixv-36158">1.2</ix:nonFraction> million Earnout Shares, <ix:nonFraction contextRef="c545" decimals="0" format="ixt:num-dot-decimal" name="cero:EarnoutShares" scale="0" unitRef="shares" id="ixv-36159">1,000,000</ix:nonFraction> of which are subject to vesting upon the achievement of certain stock price-based earnout targets and <ix:nonFraction contextRef="c546" decimals="0" format="ixt:num-dot-decimal" name="cero:EarnoutShares" scale="0" unitRef="shares" id="ixv-36160">200,000</ix:nonFraction> of which are subject to vesting upon a change of control, respectively.</span></td></tr> </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><span style="font-size: 8pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"> <tr style="vertical-align: top"> <td style="width: 0.25in">&#160;</td> <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.</span></td> <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Certain holders of the Company&#8217;s common stock received a pro rata portion of <ix:nonFraction contextRef="c536" decimals="0" format="ixt:num-dot-decimal" name="cero:EarnoutShares" scale="0" unitRef="shares" id="ixv-36161">875,000</ix:nonFraction> Earnout Shares, which became fully vested upon the closing of the Business Combination.</span></td></tr> </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><span style="font-size: 8pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"> <tr style="vertical-align: top"> <td style="width: 0.25in">&#160;</td> <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">5.</span></td> <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Certain holders of the Company&#8217;s common stock received a pro rata portion of up to <ix:nonFraction contextRef="c547" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodSharesRestrictedStockAwardGross" scale="6" unitRef="shares" id="ixv-36162">1.0</ix:nonFraction> million Earnout Shares, which are subject to vesting upon the Company&#8217;s filing an investigational new drug application (&#8220;IND&#8221;) with the FDA.</span></td></tr> </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><span style="font-size: 8pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">6.</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Each outstanding Company option was converted into an option to purchase a number of shares of Class A common stock, equal to the Company&#8217;s common shares underlying the option multiplied by the Exchange Ratio, at an exercise price per share equal to the Company option exercise price divided by the Exchange Ratio.</span></td></tr>
  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><span style="font-size: 8pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"> <tr style="vertical-align: top"> <td style="width: 0.25in">&#160;</td> <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">7.</span></td> <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Each warrant to purchase CERo preferred stock was converted into a warrant to acquire a number of shares of Class A common stock obtained by dividing the warrant as-if-exercised liquidation preference by $<ix:nonFraction contextRef="c537" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:SharesIssuedPricePerShare" scale="0" unitRef="usdPershares" id="ixv-36163">10.00</ix:nonFraction>, with the exercise price equal to the total CERo warrant exercise amount divided by the number of shares of Class A common stock issuable upon exercise.</span></td></tr> </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"><span style="font-size: 8pt">&#160;</span></p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
    <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">8.</span></td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The CERo Notes automatically converted into shares of Series A Preferred Stock.</span></td></tr>
  </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p></ix:continuation><div>

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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->46<!-- Field: /Sequence --></span></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PHOENIX BIOTECH ACQUISITION CORP.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>DECEMBER 31, 2023</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><ix:continuation continuedAt="_SubsequentEventsTextBlock-c413_cont_3" id="_SubsequentEventsTextBlock-c413_cont_2"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>PIPE Financing</i></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">In February 2024, New CERo
consummated a private placement of <ix:nonFraction contextRef="c548" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SharesIssued" scale="0" unitRef="shares" id="ixv-36164">10,080</ix:nonFraction> shares of New CERo Series A Preferred Stock, par value $<ix:nonFraction contextRef="c549" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:SharesIssued" scale="0" unitRef="shares" id="ixv-36165">0.0001</ix:nonFraction> per share (the &#8220;Series
A Preferred Stock&#8221;), warrants to purchase <ix:nonFraction contextRef="c550" decimals="0" format="ixt:num-dot-decimal" name="cero:WarrantsIssuedToPurchaseCommonStock" scale="0" unitRef="shares" id="ixv-36166">612,746</ix:nonFraction> shares of Common Stock (the &#8220;Common Warrants&#8221;) and warrants to purchase
<ix:nonFraction contextRef="c551" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodSharesPurchaseOfAssets" scale="0" unitRef="shares" id="ixv-36167">2,500</ix:nonFraction> shares of Series A Preferred Stock (the &#8220;Preferred Warrants&#8221; and, together with the Common Warrants, the &#8220;PIPE
Warrants&#8221;), pursuant to the Amended and Restated Securities Purchase Agreement, dated February 14, 2024, by and among the Company,
CERo and certain accredited investors (the &#8220;Initial Investors&#8221;) for aggregate cash proceeds to New CERo of approximately $<ix:nonFraction contextRef="c536" decimals="-4" format="ixt:num-dot-decimal" name="cero:AggregateCashProceeds" scale="6" unitRef="usd" id="ixv-36168">9.98</ix:nonFraction>
million. In April 2024, New CERo consummated a private placement of <ix:nonFraction contextRef="c552" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SaleOfStockNumberOfSharesIssuedInTransaction" scale="0" unitRef="shares" id="ixv-36169">626</ix:nonFraction> shares of Series B convertible preferred stock, par value $<ix:nonFraction contextRef="c553" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockParOrStatedValuePerShare" scale="0" unitRef="usdPershares" id="ixv-36170">0.0001</ix:nonFraction>
per share (&#8220;Series B Preferred Stock&#8221;), pursuant to the Securities Purchase Agreement, dated March 28, 2024, by and among
New CERo and certain accredited investors (the &#8220;Additional Investors&#8221; and, together with the Initial Investors, the &#8220;PIPE
Investors&#8221;), for aggregate cash proceeds to New CERo of approximately $<ix:nonFraction contextRef="c554" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:SaleOfStockConsiderationReceivedPerTransaction" scale="6" unitRef="usd" id="ixv-36171">0.5</ix:nonFraction> million. A portion of such Series A Preferred Stock was
issued as consideration for the cancellation of outstanding indebtedness or securities of the Company or CERo, including a promissory
note of the Company and certain convertible bridge notes of CERo. Such transactions collectively are referred to as the &#8220;PIPE Financing.&#8221;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">In connection with the PIPE
Financing, New CERo entered into the PIPE Registration Rights Agreements with the PIPE Investors. The terms of the PIPE Registration Rights
Agreements require New CERo to register the number of shares of common stock, par value $<ix:nonFraction contextRef="c196" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:CommonStockParOrStatedValuePerShare" scale="0" unitRef="usdPershares" id="ixv-36172">0.0001</ix:nonFraction> per share (&#8220;Common Stock&#8221;)
equal to the sum of (i) <ix:nonFraction contextRef="c555" decimals="2" format="ixt:num-dot-decimal" name="cero:PercentageOfCommonStockIssuable" scale="-2" unitRef="pure" id="ixv-36173">200</ix:nonFraction>% of the maximum number of Common Stock issuable upon conversion of the Series A Preferred Stock and Series
B Preferred Stock (assuming for purposes hereof that (w) all the Preferred Warrants have been exercised in full, (x) the Series A Preferred
Stock and Series B Preferred Stock is convertible at the Alternate Conversion Price (as defined in the Series A Certificate of Designations
and Series B Certificate of Designations) assuming an Alternate Conversion Date (as defined in the Series A Certificate of Designations
and Series B Certificate of Designations) of such date of determination, and (y) any such conversion shall not take into account any limitations
on the conversion of the Series A Preferred Stock and Series B Preferred Stock set forth in the Series A Certificate of Designations and
the Series B Certificate of Conversions, respectively) and (ii) the maximum number of Warrant Common Shares issuable upon exercise of
the Common Warrants (without taking into account any limitations on the exercise of the Common Warrants set forth therein). In addition,
New CERo entered into a side letter with Keystone, pursuant to which New CERo agreed to make a payment of $<ix:nonFraction contextRef="c556" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentPeriodicPayment" scale="6" unitRef="usd" id="ixv-36174">1.0</ix:nonFraction> million to Keystone, which
amount reflects an original issue discount to Keystone, and to reimburse $<ix:nonFraction contextRef="c40" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:LegalFees" scale="0" unitRef="usd" id="ixv-36175">150,000</ix:nonFraction> of legal expenses incurred thereby. Additionally, the
Company entered into a share reallocation agreement (the &#8220;Share Reallocation Agreement&#8221;) with the Sponsor and an institutional
investor party thereto (a &#8220;Share Reallocation Investor&#8221;). Under the Share Reallocation Agreement, (i) the Share Reallocation
Investor agreed to purchase an aggregate of <ix:nonFraction contextRef="c557" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SharesIssued" scale="0" unitRef="shares" id="ixv-36176">1,500</ix:nonFraction> shares of Series A Preferred Stock for an aggregate purchase price of $<ix:nonFraction contextRef="c40" decimals="-5" format="ixt:num-dot-decimal" name="cero:AggregatePurchasePrice" scale="6" unitRef="usd" id="ixv-36177">1.5</ix:nonFraction> million in
accordance with the Securities Purchase Agreement, and (ii) the Sponsor agreed to forfeit an aggregate of <ix:nonFraction contextRef="c558" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodSharesShareBasedCompensationForfeited" scale="0" unitRef="shares" id="ixv-36178">250,000</ix:nonFraction> shares of Class A Common
Stock held by the Sponsor for no additional consideration other than the commitments and undertakings of the Share Reallocation Investor
made to the Company, in each case, on or promptly following the consummation of the Business Combination at the Closing.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Fee Modification </i></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">Prior to the close of the
Business Combination, the Company entered into fee modification agreements with certain third-party vendors and service providers, pursuant
to which such vendors received an aggregate of <ix:nonFraction contextRef="c196" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SharesIssued" scale="0" unitRef="shares" id="ixv-36179">1,629,500</ix:nonFraction> shares of Common Stock in lieu of certain payments due to such vendors. As a
result, the cash expenses payable at Closing were reduced by approximately $<ix:nonFraction contextRef="c40" decimals="-4" format="ixt:num-dot-decimal" name="us-gaap:OtherExpenses" scale="6" unitRef="usd" id="ixv-36180">8.54</ix:nonFraction> million.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">In particular, the Company
entered into a fee modification agreement with CCM, pursuant to which CCM forfeited such fees and the Company issued an aggregate of <ix:nonFraction contextRef="c559" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodSharesShareBasedCompensationGross" scale="0" unitRef="shares" id="ixv-36181">1,200,000</ix:nonFraction>
shares of Common Stock, with <ix:nonFraction contextRef="c560" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodSharesShareBasedCompensationGross" scale="0" unitRef="shares" id="ixv-36182">1,000,000</ix:nonFraction> of such shares being subject to forfeiture unless New CERo conducts a capital-raising transaction
within nine months of the Closing, pursuant to which New CERo shall issue and sell securities in an aggregate amount of at least $<ix:nonFraction contextRef="c23" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:MarketableSecurities" scale="6" unitRef="usd" id="ixv-36183">25.0</ix:nonFraction>
million, Affiliates of CCM have and manage investment vehicles with a passive investment in the Sponsor.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Equity Line of Credit &#8211; Keystone Capital
Partners, LLC (&#8220;Keystone&#8221;)</i></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">On February 14, 2024, as
a condition to the closing of the PIPE Financing, New CERo entered into a common stock purchase agreement (the &#8220;Common Stock Purchase
Agreement&#8221;) with Keystone, pursuant to which New CERo may sell and issue, and Keystone is obligated to purchase, up to the lesser
of (i) an aggregate of up to <ix:nonFraction contextRef="c561" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:StockholdersEquityOtherShares" scale="0" unitRef="shares" id="ixv-36184">2,977,070</ix:nonFraction> shares of newly issued shares of Common Stock and (ii) the Exchange Cap (as defined below).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p></ix:continuation><div>

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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PHOENIX BIOTECH ACQUISITION CORP.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>DECEMBER 31, 2023</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><ix:continuation continuedAt="_SubsequentEventsTextBlock-c413_cont_4" id="_SubsequentEventsTextBlock-c413_cont_3"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">As consideration for Keystone&#8217;s
commitment to purchase shares of Common Stock pursuant to the Common Stock Purchase Agreement, at Closing, New CERo issued <ix:nonFraction contextRef="c562" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SharesIssued" scale="0" unitRef="shares" id="ixv-36185">119,050</ix:nonFraction> shares
of Common Stock to Keystone. In addition, New CERo has agreed to issue an additional $<ix:nonFraction contextRef="c563" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SharesIssued" scale="0" unitRef="shares" id="ixv-36186">250,000</ix:nonFraction> of shares of Common Stock to Keystone at
each of the 90- and 180-day anniversaries of the effectiveness of the registration statement on Form S-1 with respect to the resale of
the shares issuable pursuant to the Common Stock Purchase Agreement, with the number of such shares determined based upon the average
of the daily VWAP (as defined below) for each of the five trading days immediately prior to such 90- or 180-day anniversary.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">New CERo does not have a
right to commence any sales of Common Stock to the Investor under the Common Stock Purchase Agreement until the time when all of the conditions
to the New CERo&#8217;s right to commence sales of Common Stock to the Investor set forth in the Common Stock Purchase Agreement have
been satisfied, including that a registration statement covering the resale of such shares is declared effective by the SEC and the final
form of prospectus contained therein is filed with the SEC (the &#8220;Commencement Date&#8221;). Over the 36-month period from and after
the Commencement Date, New CERo will control the timing and amount of any sales of Common Stock to Keystone. Actual sales of shares of
Common Stock to Keystone under the Common Stock Purchase Agreement will depend on a variety of factors to be determined by New CERo from
time to time, including, among others, market conditions, the trading price of the Common Stock and determinations by the Company as to
the appropriate sources of funding and New CERo&#8217;s operations.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">At any time from and after
the Commencement Date, on any business day on which the closing sale price of the Common Stock is equal to or greater than $<ix:nonFraction contextRef="c564" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:SaleOfStockPricePerShare" scale="0" unitRef="usdPershares" id="ixv-36187">1.00</ix:nonFraction> (the
&#8220;Purchase Date&#8221;), New CERo may direct Keystone to purchase a specified number of shares of Common Stock (a &#8220;Fixed Purchase&#8221;)
not to exceed <ix:nonFraction contextRef="c23" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ExcessStockSharesIssued" scale="0" unitRef="shares" id="ixv-36188">10,000</ix:nonFraction> shares at a purchase price equal to the lesser of <ix:nonFraction contextRef="c40" decimals="2" format="ixt:num-dot-decimal" name="cero:PercentagePurchasePrice" scale="-2" unitRef="pure" id="ixv-36189">90</ix:nonFraction>% of (i) the daily volume weighted average price (the &#8220;VWAP&#8221;)
of the Common Stock for the five trading days immediately preceding the applicable Purchase Date for such Fixed Purchase and (ii) the
closing price of a share of Common Stock on the applicable Purchase Date for such Fixed Purchase during the full trading day on such applicable
Purchase Date.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">In addition, at any time
from and after the Commencement Date, on any business day on which the closing sale price of the Common Stock is equal to or greater than
$<ix:nonFraction contextRef="c565" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:SaleOfStockPricePerShare" scale="0" unitRef="usdPershares" id="ixv-36190">1.00</ix:nonFraction> and such business day is also the Purchase Date for a Fixed Purchase of the maximum allowable amount of shares of Common Stock (the
&#8220;VWAP Purchase Date&#8221;), New CERo may also direct Keystone to purchase, on the immediately following business day, an additional
number of shares of Common Stock in an amount up to a defined limit at a purchase price equal to the lesser of <ix:nonFraction contextRef="c566" decimals="2" format="ixt:num-dot-decimal" name="cero:PercentagePurchasePrice" scale="-2" unitRef="pure" id="ixv-36191">90</ix:nonFraction>% of (i) the closing
sale price of the Common Stock on the applicable VWAP Purchase Date and (ii) the VWAP during the VWAP Purchase Date between the opening
of trading and the purchase termination time. At any time from and after the Commencement Date, on any business day that is also the VWAP
Purchase Date for a VWAP Purchase, New CERo may also direct Keystone to purchase, on such same business day, an additional number of shares
of Common Stock in an amount up to a defined limit (an &#8220;Additional VWAP Purchase&#8221;) at a purchase price equal to the lesser
of <ix:nonFraction contextRef="c567" decimals="2" format="ixt:num-dot-decimal" name="cero:PercentagePurchasePrice" scale="-2" unitRef="pure" id="ixv-36192">90</ix:nonFraction>% of (i) the closing sale price of the Common Stock on the applicable Additional VWAP Purchase Date and (ii) the VWAP during the
measurement time on the Additional VWAP Purchase Date.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">In no event shall New CERo
issue to Keystone under the Common Stock Purchase Agreement more than <ix:nonFraction contextRef="c190" decimals="4" format="ixt:num-dot-decimal" name="cero:PercentageOfCommonStockOutstanding" scale="-2" unitRef="pure" id="ixv-36193">19.99</ix:nonFraction>% of the total number of shares of Common Stock outstanding
immediately prior to the execution of the Common Stock Purchase Agreement (the &#8220;Exchange Cap&#8221;), unless (i) the Company obtains
the approval of the issuance of such shares by its stockholders in accordance with the applicable stock exchange rules or (ii) sales of
Common Stock are made at a price equal to or in excess of the lower of (A) the closing price immediately preceding the delivery of the
applicable notice to the Investor and (B) the average of the closing prices of the Common Stock for the five business days immediately
preceding the delivery of such notice (in each case plus an incremental amount to take into account the Commitment Shares, such that the
sales of such Common Stock to Keystone would not count toward the Exchange Cap because they are &#8220;at market&#8221; under applicable
stock exchange rules.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">Concurrent with the execution
of the Common Stock Purchase Agreement, the Company entered into a registration rights agreement with Keystone (the &#8220;ELOC Registration
Rights Agreement&#8221;), pursuant to which New CERo agreed to provide Keystone with customary registration rights related to the shares
issued under the ELOC Registration Rights Agreement.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Equity Line of Credit &#8211; Arena Business
Solutions Global SPC II, Ltd (&#8220;Arena&#8221;)</i></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">On February 23, 2024, New
CERo entered into a purchase agreement (the &#8220;Purchase Agreement&#8221;) with Arena, under which Arena has committed to purchase
up to $<ix:nonFraction contextRef="c568" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:PurchaseObligation" scale="6" unitRef="usd" id="ixv-36194">25</ix:nonFraction> million (the &#8220;Commitment Amount&#8221;) of New CERo&#8217;s shares of Common Stock, subject to the satisfaction of the
conditions in the Purchase Agreement.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p></ix:continuation><div>

</div><div>


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    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PHOENIX BIOTECH ACQUISITION CORP.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>NOTES TO FINANCIAL STATEMENTS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>DECEMBER 31, 2023</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><ix:continuation id="_SubsequentEventsTextBlock-c413_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">Such sales of Common Stock,
if any, will be subject to certain limitations, and may occur from time to time at New CERo&#8217;s sole discretion over the period commencing
on the termination of the Common Stock Purchase Agreement and expiring approximately 36 months following such termination, provided that
a Registration Statement (as defined below) is and remains effective, and the other conditions set forth in the Purchase Agreement are
satisfied. New CERo will control the timing and amount of any sales of Common Stock to Arena. Actual sales of shares of Common Stock to
Arena under the Purchase Agreement will depend on a variety of factors to be determined by New CERo from time to time, including, among
others, market conditions, the trading price of the Common Stock and determinations by the Company as to the appropriate sources of funding
and New CERo&#8217;s operations.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">On any trading day, New CERo
may direct Arena to purchase amounts of its Common Stock up to the Commitment Amount. The maximum amount that the Company may specify
in any one Advance Notice is equal to: (A) if the Advance Notice is received by 8:30 a.m. Eastern time, then the maximum amount that the
Company may specify is equal to the lesser of (i) an amount equal to <ix:nonFraction contextRef="c40" decimals="2" format="ixt:num-dot-decimal" name="cero:PercentageOfAverageDailyValueTradedOfTheCommonStock" scale="-2" unitRef="pure" id="ixv-36195">60</ix:nonFraction>% of the average Daily Value Traded of the Common Stock on the
ten trading days immediately preceding such Advance Notice, or (ii) $<ix:nonFraction contextRef="c23" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:AdvancesToAffiliate" scale="6" unitRef="usd" id="ixv-36196">20.0</ix:nonFraction> million; and (B) if the Advance Notice is received after 8:30
a.m. Eastern time but prior to 10:30 a.m. Eastern time, then the maximum amount that the Company may specify in an Advance Notice is equal
to the lesser of: (i) an amount equal to <ix:nonFraction contextRef="c190" decimals="2" format="ixt:num-dot-decimal" name="cero:PercentageOfAverageDailyValueTradedOfTheCommonStock" scale="-2" unitRef="pure" id="ixv-36197">30</ix:nonFraction>% of the average Daily Value Traded of the Common Stock on the ten trading days immediately
preceding such Advance Notice, or (ii) $<ix:nonFraction contextRef="c196" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:AdvancesToAffiliate" scale="6" unitRef="usd" id="ixv-36198">15.0</ix:nonFraction> million. For these purposes, &#8220;Daily Value Traded&#8221; is the product obtained by
multiplying the daily trading volume of New CERo Common Stock on Nasdaq during regular trading hours by the VWAP for that trading day.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">Under the applicable rules
of Nasdaq and the Purchase Agreement, New CERo will not sell or issue to Arena shares of Common Stock, inclusive of the Commitment Fee
Shares (as defined below), in excess of the Exchange Cap, unless the Company obtains stockholder approval to issue shares of Common Stock
in excess of the Exchange Cap. In any event, New CERo may not issue or sell any shares of Common Stock under the Purchase Agreement if
such issuance or sale would breach any applicable Nasdaq rules.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">The Purchase Agreement also
prohibits the Company from directing Arena to purchase any shares of Common Stock if those shares, when aggregated with all other shares
of Common Stock then beneficially owned by Arena and its affiliates as a result of purchases under the Purchase Agreement, would result
in Arena and its affiliates having beneficial ownership of more than the <ix:nonFraction contextRef="c40" decimals="4" format="ixt:num-dot-decimal" name="cero:PercentageOfCommonStockOutstanding" scale="-2" unitRef="pure" id="ixv-36199">4.99</ix:nonFraction>% of the then-outstanding Common Stock.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">The purchase price of the
shares of Common Stock will be equal to <ix:nonFraction contextRef="c190" decimals="2" format="ixt:num-dot-decimal" name="cero:PercentagePurchasePrice" scale="-2" unitRef="pure" id="ixv-36200">90</ix:nonFraction>% of the lower of (i) the closing sale price of the Common Stock on the purchase date (ii) VWAP
of the Common Stock during the purchase date and (iii) the arithmetic average of the three lowest closing prices of the Common Stock during
the ten consecutive trading days ending on the trading day immediately preceding the purchase date.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">As consideration for Arena&#8217;s
irrevocable commitment to purchase Common Stock upon the terms of the Purchase Agreement, New CERo agreed to issue a number of shares
of Common Stock (the &#8220;Commitment Fee Shares&#8221;) equal to <ix:nonFraction contextRef="c23" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SharesIssued" scale="0" unitRef="shares" id="ixv-36201">500,000</ix:nonFraction> divided by the simple average of the daily VWAP of the Common
Stock during the five trading days immediately preceding the effectiveness of the registration statement with respect to the resale by
Keystone of the shares of Common Stock issuable pursuant to the Common Stock Purchase Agreement (the &#8220;Registration Statement&#8221;).
In addition, New CERo has granted Arena customary registration rights related to the shares issued under the Purchase Agreement, and has
agreed to include the resale by Arena of the Commitment Fee Shares on the Registration Statement.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></p><div>

</div><!-- Field: Page; Sequence: 249; Value: 46 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->49<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><div><a id="f_012"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Report of Independent Registered Public Accounting
Firm</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">To the Stockholders and the Board of Directors of CERo Therapeutics,
Inc.:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Opinion on the Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">We have audited the accompanying
balance sheets of CERo Therapeutics, Inc. (the &#8220;Company&#8221;) as of December 31, 2023 and 2022, the related statements of operations,
convertible preferred stock and stockholders&#8217; deficit and cash flows for the years then ended, and the related notes to the financial
statements (collectively, the &#8220;financial statements&#8221;). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows
for the years then ended, in conformity with accounting principles generally accepted in the United States of America.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Emphasis of a Matter Regarding Going Concern</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">The accompanying financial
statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements,
the Company has incurred net losses since its inception, and has negative cash flows from operations and will need additional funding
to complete planned development efforts. This raises substantial doubt about the Company&#8217;s ability to continue as a going concern.
Management&#8217;s plans in regard to these matters also are described in Note 1. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Basis for Opinion</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">These financial statements
are the responsibility of the Company&#8217;s management. Our responsibility is to express an opinion on the Company&#8217;s financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (&#8220;PCAOB&#8221;) and are required to be independent with respect to the Company in accordance with U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">We conducted our audits in
accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required
to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness
of the Company&#8217;s internal control over financial reporting. Accordingly, we express no such opinion.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt; text-align: justify">Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management,
as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for
our opinion.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">/s/ Wolf &amp; Company, P.C.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">We have served as the Company&#8217;s auditor
since 2023.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Boston, MA</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">April 1, 2024</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><div><a id="f_013"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CERo Therapeutics, Inc.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Balance Sheets</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>December 31, 2023 and 2022</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

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  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table><div>


</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: center">See accompanying notes to financial
statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: center">&#160;</p><div>


</div><!-- Field: Page; Sequence: 251; Value: 46 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->51<!-- Field: /Sequence --></span></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="f_014"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CERo Therapeutics, Inc.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Statements of Operations</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2023 and 2022</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>Operating expenses:</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td><td>&#160;</td>
    <td colspan="2">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; padding-bottom: 1.5pt; padding-left: 0.25in">Total operating expenses</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes to financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->52<!-- Field: /Sequence --></span></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="f_015"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CERo Therapeutics, Inc.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Statements of Convertible Preferred Stock and
Stockholders&#8217; Deficit</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2023 and 2022</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes to financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->53<!-- Field: /Sequence --></span></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="f_016"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CERo Therapeutics, Inc.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Statements of Cash Flows</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>For the years ended December 31, 2023 and 2022</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom">
    <td>Cash flows from operating activities:</td><td>&#160;</td>
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    <td colspan="2" style="text-align: right">&#160;</td><td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Adjustments to reconcile net loss to net cash used in operating activities:</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Stock-based compensation</td><td>&#160;</td>
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    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Amortization of right-to-use operating lease asset</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Gain on revaluation of warrant liability</td><td>&#160;</td>
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    <td style="text-align: left; text-indent: -9pt; padding-left: 0.25in">Change in assets and liabilities:</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Cash, restricted cash, and cash equivalents at end of year</td><td style="padding-bottom: 1.5pt">&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right">&#160;</td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-indent: -9pt; padding-left: 9pt">Cash</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c24" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CashEquivalentsAtCarryingValue" scale="0" unitRef="usd" id="ixv-36371">88,354</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
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    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Restricted cash</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c23" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RestrictedCashEquivalentsCurrent" scale="0" unitRef="usd" id="ixv-36372">79,756</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 1.5pt solid; text-align: left">&#160;</td><td style="border-bottom: Black 1.5pt solid; text-align: right"><ix:nonFraction contextRef="c24" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RestrictedCashEquivalentsCurrent" scale="0" unitRef="usd" id="ixv-36373">79,756</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
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    <td style="text-align: left; padding-bottom: 1.5pt; text-indent: -9pt; padding-left: 9pt">Cash, cash equivalents, and restricted cash</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c23" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RestrictedCashAndCashEquivalents" scale="0" unitRef="usd" id="ixv-36374">1,601,255</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">See accompanying notes to financial statements.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->54<!-- Field: /Sequence --></span></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><div><a id="f_017"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CERo Therapeutics, Inc.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><ix:nonNumeric contextRef="c40" escape="true" name="us-gaap:OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock" id="ixv-31766"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTE 1 &#8211; <span style="text-transform: uppercase">Organization
and Description of the Business</span></b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.7pt; text-align: justify; text-indent: -49.7pt"><span style="text-transform: uppercase"><b>&#160;</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Nature of Operations </b>&#8211; CERo Therapeutics,
Inc. (the &#8220;Company&#8221;) was incorporated in Delaware on September 23, 2016, and is based in South San Francisco, California.
The Company is focused on genetically engineering human immune cells to fight cancer. Since inception, the Company has focused on developing
its therapeutic platform and has not yet begun clinical development or product commercialization. Future Company efforts will focus on
continued product development, including clinical development, to support regulatory approval to commercialize and subsequent product
commercialization.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Going concern </b>&#8211; The accompanying
financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization
of assets and satisfaction of liabilities in the normal course of business. The Company&#8217;s ability to continue as a going concern
is dependent on its ability to raise additional capital to fund its research and development (&#8220;R&amp;D&#8221;) activities and meet
its obligations on a timely basis. Since inception, the Company has incurred net losses and operating cash flow deficits, resulting in
an accumulated deficit of $<ix:nonFraction contextRef="c23" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:RetainedEarningsAccumulatedDeficit" scale="6" sign="-" unitRef="usd" id="ixv-36376">43.1</ix:nonFraction> million as of December&#160;31, 2023. Additional funds are necessary to maintain current operations and
to continue R&amp;D activities. However, there can be no assurance that sufficient funding will be available to allow the Company to successfully
continue its R&amp;D activities and planned regulatory filings with the Food and Drug Administration (&#8220;FDA&#8221;). If the Company
is unable to obtain necessary funds, significant reductions in spending and the delay or cancellation of planned activities may be necessary.
These actions would have a material adverse effect on the Company&#8217;s business, results of operations, and prospects. These conditions
raise substantial doubt about the Company&#8217;s ability to continue as a going concern within one year from the date these financial
statements are issued. The accompanying financial statements do not include any adjustments relating to the recoverability and classification
of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Risks and uncertainties </b>&#8211; The Company
is subject to all of the risks inherent in an early-stage biotechnology company. These risks include, but are not limited to, limited
management resources, intense competition, and dependence upon the availability of cash to sustain operations. The Company&#8217;s operating
results may be materially affected by the foregoing factors.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company&#8217;s research also requires approvals
from the FDA prior to beginning clinical trials and prior to product commercialization. There can be no assurance that the Company&#8217;s
current ongoing research and future clinical development will result in the granting of these required approvals. If the Company is denied
such approvals or such approvals are substantially delayed, they could have a material adverse effect upon the Company&#8217;s future
financial results and cash flows.</p></ix:nonNumeric><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

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of financial statements in conformity with accounting principles generally accepted in the United States of America (&#8220;U.S.&#8221;)
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent
liabilities at the date of the financial statements, and the reported amounts of expenses incurred during the reporting period. Items
subject to such estimates and assumptions include the estimates of the fair values of convertible preferred stock, common stock, and preferred
stock warrant liability, stock-based compensation expense, the present value of right-to-use assets and lease liabilities, and the valuation
allowance associated with deferred tax assets. Actual results could differ from those estimates.</p></ix:nonNumeric>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

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less to be cash equivalents. As of December&#160;31, 2023 and 2022, cash and cash equivalents consist of cash deposited with banks, including
a money market sweep account. Restricted cash consists of $<ix:nonFraction contextRef="c23" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RestrictedCash" scale="0" unitRef="usd" id="ixv-36377">79,756</ix:nonFraction> held on account by a financial institution as collateral for a demand
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</div><div>


</div><!-- Field: Page; Sequence: 255; Value: 46 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CERo Therapeutics, Inc.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c40_cont_2" id="_SignificantAccountingPoliciesTextBlock-c40_cont_1"><ix:nonNumeric contextRef="c40" escape="true" name="us-gaap:ConcentrationRiskCreditRisk" id="ixv-31828"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Concentration of credit risk </b>&#8211; Financial
instruments that potentially subject the Company to credit risk consist primarily of cash, restricted cash, and cash equivalents. The
Company&#8217;s cash, restricted cash, and cash equivalents are on deposit with two financial institutions that management believe are
of sufficiently high credit quality. Deposits at any of the Company&#8217;s financial institutions may, at times, exceed federal insured
limits.</p></ix:nonNumeric>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

<ix:nonNumeric contextRef="c40" escape="true" name="us-gaap:PropertyPlantAndEquipmentPolicyTextBlock" id="ixv-31833"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Property and equipment </b>&#8211; Property
and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated
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Expenditures for repairs and maintenance are charged to expense as incurred. Upon disposition, the cost and related accumulated depreciation
are removed from the accounts and the resulting gain or loss is reflected in the statements of operations.</p></ix:nonNumeric>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

<ix:nonNumeric contextRef="c40" escape="true" name="us-gaap:ImpairmentOrDisposalOfLongLivedAssetsPolicyTextBlock" id="ixv-31838"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Impairment of long-lived assets </b>&#8211;
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. When such an event occurs, management determines whether there has been an impairment by comparing the
anticipated undiscounted future net cash flows to the related asset&#8217;s carrying value. If an asset is considered impaired, the asset
is written down to fair value, which is determined based either on discounted cash flows or appraised value, depending on the nature of
the asset. Through December&#160;31, 2023, the Company has not experienced any impairment losses on its long-lived assets.</p></ix:nonNumeric>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

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an arrangement contains a lease at inception. A lease is an operating or financing contract, or part of a contract, that conveys the right
to control the use of an identified tangible asset for a period of time in exchange for consideration.</p></ix:nonNumeric>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

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liability equal to the present value of the remaining lease payments, and a right of use asset equal to the lease liability, subject to
certain adjustments, such as for lease incentives. In determining the present value of the lease payments, the Company uses its incremental
borrowing rate, determined by estimating the Company&#8217;s applicable, fully collateralized borrowing rate, with adjustment as appropriate
for lease term. The lease term at the lease commencement date is determined based on the non-cancellable period for which the Company
has the right to use the underlying asset, together with any periods covered by an extension option if the Company is reasonably certain
to exercise that option.</p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

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with an initial term of 12 months or less are considered short term and are (a) not recognized in the balance sheet and (b) recognized
as an expense on a straight-line basis over the lease term. The Company does not sublease any of its leased assets to third parties and
the Company&#8217;s lease agreements do not contain any residual value guarantees or restrictive covenants.</p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

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reassessment and re-measurement requirements for lessees based on certain triggering events or impairment conditions. There were no impairment
indicators identified during the years ended December&#160;31, 2023 or 2022 that would require impairment testing of the Company&#8217;s
right-of-use assets.</p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<ix:continuation id="_LesseeLeasesPolicyTextBlock-c40_cont_4"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Certain of the Company&#8217;s leases include
variable lease costs to reimburse the lessor for real estate tax and insurance expenses, and certain non-lease components that transfer
a distinct service to the Company, such as common area maintenance services. The Company has elected to separate the accounting for fixed
lease components and variable and non-lease components for real estate and equipment leases. The variable lease costs are recorded on
the statement of operations as rent expense, within general and administrative expenses. The Company does not have any financing leases
at December 31, 2023 or 2022.</p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

<ix:nonNumeric contextRef="c40" escape="true" name="cero:ConvertiblePreferredStockPolicyTextBlock" id="ixv-31860"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Convertible preferred stock </b>&#8211; The
Company&#8217;s convertible preferred stock is redeemable upon the liquidation or winding up of the Company, a change in control, or a
deemed liquidation event related to the sale of substantially all the assets of the Company. Based on the ownership of the Company&#8217;s
equity and associated board of director control, deemed liquidation events are not solely within the control of the Company. As a result,
the shares of the Company&#8217;s convertible preferred stock are considered contingently redeemable. The Company has elected to present
its convertible preferred stock as mezzanine equity in its balance sheet. Further, the Company has elected not to adjust the carrying
values of its convertible preferred stock to the redemption value of such shares, since it is uncertain whether or when a redemption event
will occur. Subsequent adjustments to increase the carrying values to the redemption values will be made when it becomes probable that
such redemption will occur. The Company has not included the effect of convertible preferred stock in the calculation of diluted loss
per share, since the inclusion of such convertible preferred stock would be anti-dilutive.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p></ix:nonNumeric></ix:continuation><div>

</div><div>


</div><!-- Field: Page; Sequence: 256; Value: 46 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->56<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CERo Therapeutics, Inc.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c40_cont_3" id="_SignificantAccountingPoliciesTextBlock-c40_cont_2"><ix:nonNumeric contextRef="c40" escape="true" name="cero:PreferredStockWarrantLiabilityPolicyTextBlock" id="ixv-31889"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Preferred stock warrant liability</b> &#8211;
Warrant accounting requires liability classification of warrants when the warrants include a conditional obligation, once the warrant
is exercised, that would require the Company to redeem its equity shares. As stated above, the shares of the Company&#8217;s convertible
preferred stock are considered contingently redeemable and therefore, any preferred stock warrants to purchase preferred shares are classified
as a liability in the Company&#8217;s balance sheets. The warrants are analyzed to determine whether the warrant is a freestanding instrument
and if so, whether the warrant was issued in a transaction with other instrument(s). If a freestanding warrant is issued with other instruments
in a single transaction, then the proceeds of the transaction are allocated first to the fair value of the warrant, with the remainder
being allocated to the other instruments. The warrants are remeasured as of each reporting period end, with any changes in fair value
recognized as interest and other income, net in the statement of operations. The Company has determined that the warrant liability is
a Level&#160;3 instrument in the fair value measurements hierarchy. The Company has not included the effect of the preferred stock warrants
in the calculation of diluted loss per share since the inclusion of such warrants would be anti-dilutive.</p></ix:nonNumeric>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

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

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

<ix:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c40_cont_2" id="_FairValueMeasurementPolicyPolicyTextBlock-c40_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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<ix:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c40_cont_3" id="_FairValueMeasurementPolicyPolicyTextBlock-c40_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 63pt; text-align: justify; text-indent: -45pt"><b>&#160;</b></p>

<ix:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c40_cont_4" id="_FairValueMeasurementPolicyPolicyTextBlock-c40_cont_3"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

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and accrued liabilities approximate fair value due to their relatively short maturities.</p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

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considered Level&#160;3 when management makes significant assumptions in developing a discounted cash flow model based upon a number of
considerations including projections of revenues, earnings, and a discount rate. To date, the Company has not recorded any adjustments
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</div><div>


</div><!-- Field: Page; Sequence: 257; Value: 46 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->57<!-- Field: /Sequence --></span></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CERo Therapeutics, Inc.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation continuedAt="_SignificantAccountingPoliciesTextBlock-c40_cont_4" id="_SignificantAccountingPoliciesTextBlock-c40_cont_3"><ix:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c40_cont_7" id="_FairValueMeasurementPolicyPolicyTextBlock-c40_cont_6"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><ix:nonNumeric contextRef="c40" continuedAt="_ScheduleOfFairValueOfSeparateAccountsByMajorCategoryOfInvestmentTextBlock-c40_cont_1" escape="true" name="us-gaap:ScheduleOfFairValueOfSeparateAccountsByMajorCategoryOfInvestmentTextBlock" id="ixv-36381">At December&#160;31, 2023 and 2022, the fair value of the Company&#8217;s
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

<ix:continuation continuedAt="_ScheduleOfFairValueOfSeparateAccountsByMajorCategoryOfInvestmentTextBlock-c40_cont_2" id="_ScheduleOfFairValueOfSeparateAccountsByMajorCategoryOfInvestmentTextBlock-c40_cont_1"><ix:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c40_cont_8" id="_FairValueMeasurementPolicyPolicyTextBlock-c40_cont_7"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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    <td colspan="14" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">December 31, 2023</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

<ix:continuation id="_ScheduleOfFairValueOfSeparateAccountsByMajorCategoryOfInvestmentTextBlock-c40_cont_2"><ix:continuation continuedAt="_FairValueMeasurementPolicyPolicyTextBlock-c40_cont_9" id="_FairValueMeasurementPolicyPolicyTextBlock-c40_cont_8"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p>

<ix:nonNumeric contextRef="c40" escape="true" name="us-gaap:ResearchAndDevelopmentExpensePolicy" id="ixv-32093"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Research and development </b>&#8211; R&amp;D
costs consist primarily of salaries and benefits, including stock-based compensation, occupancy, materials and supplies, contracted research,
consulting arrangements, and other expenses incurred in the pursuit of the Company&#8217;s R&amp;D programs. R&amp;D costs are expensed
as incurred.</p></ix:nonNumeric>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

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periodically issues common stock and stock options to officers, directors, and consultants for services rendered. Stock-based compensation
accounting requires the recognition of stock-based compensation expense, using a grant date fair value-based method, for costs related
to all share-based payments including stock options and restricted stock awards granted to employees and non-employees. Companies are
required to estimate the fair value of all share-based payment awards on the date of grant using an option pricing model, and the Company
uses a Black-Scholes option pricing model (&#8220;Black-Scholes&#8221;) to estimate option award fair value. The fair value of restricted
stock awards is based upon the estimated share price of the common shares on the date of grant. Forfeitures are accounted for as they
occur, and the Company applies the simplified method to estimate expected term of &#8220;plain vanilla&#8221; options. All options and
restricted stock awards granted since inception are expensed on a straight-line basis over the requisite service period, which is usually
the vesting period, and the related amount is recognized in the statements of operations.</p></ix:nonNumeric>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<ix:continuation id="_ShareBasedCompensationOptionAndIncentivePlansPolicy-c40_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accounting for stock options granted to outside
consultants is consistent with the accounting for stock-based payments to officers and directors, as described above, by measuring the
cost of services received in exchange for equity awards utilizing the grant date fair value of the awards, with the cost recognized as
stock-based compensation expense on the straight-line basis in the Company&#8217;s financial statements over the vesting period of the
awards.</p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

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for income taxes under the liability method. Under this method, deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences
are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts
expected to be realized.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric></ix:continuation><div>

</div><div>


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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CERo Therapeutics, Inc.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation id="_SignificantAccountingPoliciesTextBlock-c40_cont_4"><ix:continuation id="_IncomeTaxPolicyTextBlock-c40_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company follows tax accounting requirements
for the recognition, measurement, presentation, and disclosure in the financial statements of any uncertain tax positions that have been
taken or expected to be taken on a tax return. No liability related to uncertain tax positions is recorded in the financial statements.
It is the Company&#8217;s policy to include penalties and interest expense related to income taxes as a component of income tax expense,
as necessary. The Company has not recorded any interest or penalties associated with income tax since inception. Tax years subsequent
to 2020 are subject to examination by federal and state authorities.</p></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

<ix:nonNumeric contextRef="c40" escape="true" name="us-gaap:EarningsPerSharePolicyTextBlock" id="ixv-32136"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Earnings per share &#8211; </b>The Company
reports both basic and diluted earnings per share. Basic earnings per share is calculated based on the weighted average number of shares
of common stock outstanding and excludes the dilutive effect of convertible preferred stock, convertible preferred stock warrants, stock
options or any other type of convertible securities. Diluted earnings per share is calculated based on the weighted average number of
shares of common stock outstanding and when the effect of stock options, warrants and other types of convertible securities is dilutive,
they are included in the calculation. Dilutive securities are excluded from the diluted earnings per share calculation if their effect
is anti-dilutive, such as in periods where the Company reports a net loss.</p></ix:nonNumeric>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p>

<ix:nonNumeric contextRef="c40" escape="true" name="us-gaap:NewAccountingPronouncementsPolicyPolicyTextBlock" id="ixv-32141"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Recent accounting pronouncements not yet adopted
</b>&#8211; In August 2020, the FASB issued ASU No. 2020-06, Debt&#8212;Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging&#8212;Contracts in Entity&#8217;s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an
Entity&#8217;s Own Equity. This amends the ASC 815 Derivatives and Hedging&#8212;Contracts in Entity&#8217;s Own Equity to simplify the
guidance on (1) accounting for convertible instruments, and (2) the derivatives scope exception for contracts in an entity&#8217;s own
equity. The guidance on earnings per share (&#8220;EPS&#8221;) has also been amended to simplify the calculations and make them more internally
consistent. The standard will be effective for nonpublic business entities beginning after December 15, 2023. The Company is currently
evaluating this new standard and the impact it will have on its financial statements, information technology systems, processes, and internal
controls.</p></ix:nonNumeric></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c40" escape="true" name="us-gaap:EarningsPerShareTextBlock" id="ixv-32147"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.7pt; text-align: justify; text-indent: -49.7pt"><b>NOTE 3 &#8211;
NET LOSS PER COMMON SHARE</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The accounting standards require the presentation
of both basic and diluted earnings per share on the face of the statements of operations. The Company&#8217;s basic net loss per share
is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period. If there are dilutive
securities, diluted income per share is computed by including common stock equivalents which includes shares issuable upon the exercise
of stock options into shares of common stock, exercise of preferred warrants into shares of preferred stock, and conversion of preferred
stock into shares of common stock, net of any shares assumed to have been purchased with the proceeds, using the treasury stock method.
In periods for which the Company reports a net loss, the common stock equivalents are not included, as they would be anti-dilutive.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

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of common stock issuable upon conversion or exercise, as applicable, of convertible securities, warrants and restricted stock that were
not included in the calculation of diluted net loss per share because such shares are antidilutive:</ix:nonNumeric></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

<ix:continuation id="_ScheduleOfEarningsPerShareBasicAndDilutedTableTextBlock-c40_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left">Common stock options</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="border-bottom: Black 4pt double; text-align: left">&#160;</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c40" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount" scale="0" unitRef="shares" id="ixv-36399">30,552,604</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  </table></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Restricted common stock can be issued to directors,
executives or employees of the Company and are subject to time-based vesting. These potential shares are excluded from the computation
of basic loss per share as these shares are not considered outstanding until vested. No unvested restricted common stock awards were outstanding
at December 31, 2023 or 2022.</p></ix:nonNumeric><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CERo Therapeutics, Inc.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

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  </table></ix:continuation>


<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.7pt; text-indent: -49.7pt"><b>&#160;</b></p><div>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

<ix:continuation id="_ScheduleOfAccruedLiabilitiesTableTextBlock-c40_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>&#160;</b></span></p><div>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2023 and 2022, the Company
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

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</div><div>


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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->60<!-- Field: /Sequence --></span></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CERo Therapeutics, Inc.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation id="_LesseeOperatingLeasesTextBlock-c40_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The interest expense related to leases was $<ix:nonFraction contextRef="c40" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InterestExpenseOther" scale="0" unitRef="usd" id="ixv-36446">260,848</ix:nonFraction>
and $<ix:nonFraction contextRef="c41" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:InterestExpenseOther" scale="0" unitRef="usd" id="ixv-36447">320,790</ix:nonFraction> for years ended December 31, 2023 and 2022, respectively.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

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future minimum lease payments (displayed by year and in the aggregate) under noncancelable operating leases with terms of more than one
year to the total operating lease liabilities recognized on the balance sheets as of December 31, 2023:</ix:nonNumeric></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

<ix:continuation id="_LesseeOperatingLeaseLiabilityMaturityTableTextBlock-c40_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="border-bottom: Black 1.5pt solid; text-align: left; font-weight: bold">Year ending December 31:</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">Operating <br/> Leases</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 88%; text-align: left">2024</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">2025</td><td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 1.5pt; text-align: left">2026</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c23" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:LesseeOperatingLeaseLiabilityPaymentsDue" scale="0" unitRef="usd" id="ixv-36452">2,677,667</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 1.5pt; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Less imputed interest</span></td><td style="padding-bottom: 1.5pt">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-bottom: 1.5pt; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Total lease liabilities</span></td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c23" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLeaseLiability" scale="0" unitRef="usd" id="ixv-36454">2,344,591</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  </table></ix:continuation></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:nonNumeric contextRef="c40" continuedAt="_PreferredStockTextBlock-c40_cont_1" escape="true" name="us-gaap:PreferredStockTextBlock" id="ixv-32595"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.7pt; text-indent: -49.7pt"><span style="text-transform: uppercase"><b>NOTE
7 &#8211; CONVERTIBLE PREFERRED STOCK</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company had <ix:nonFraction contextRef="c23" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockCapitalSharesReservedForFutureIssuance" scale="0" unitRef="shares" id="ixv-36455"><ix:nonFraction contextRef="c24" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockCapitalSharesReservedForFutureIssuance" scale="0" unitRef="shares" id="ixv-36456">75,120,105</ix:nonFraction></ix:nonFraction> shares of capital stock
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combination (the &#8220;Business Combination&#8221;), pursuant to the Business Combination Agreement, dated as of June 4, 2023, as amended
from time to time (as amended, the &#8220;Business Combination Agreement&#8221;) by and among the Company, Phoenix Biotech Acquisition
Corp. (&#8220;PBAX&#8221;) and PBCE Merger Sub, Inc. (&#8220;Merger Sub&#8221;), the outstanding convertible preferred stock converted
to CERo Therapeutics Holdings, Inc. (&#8220;New CERo&#8221;) common stock at a conversion ratio equal to <ix:nonFraction contextRef="c569" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockConvertibleConversionRatio" scale="0" unitRef="pure" id="ixv-36460">0.0806</ix:nonFraction> and <ix:nonFraction contextRef="c570" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockConvertibleConversionRatio" scale="0" unitRef="pure" id="ixv-36461">0.1757</ix:nonFraction> shares of New
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stock (&#8220;Series&#160;Seed Preferred Stock&#8221;) and Series&#160;A convertible preferred stock (&#8220;Series&#160;A Preferred Stock&#8221;),
respectively, resulting in the issuance of <ix:nonFraction contextRef="c591" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesIssued" scale="0" unitRef="shares" id="ixv-36463">415,498</ix:nonFraction> and <ix:nonFraction contextRef="c557" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesIssued" scale="0" unitRef="shares" id="ixv-36464">3,999,997</ix:nonFraction> common shares for the Series Seed Preferred Stock and Series A Preferred
Stock, respectively (see Note 15).</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><ix:nonNumeric contextRef="c40" continuedAt="_ScheduleOfConversionsOfStockTextBlock-c40_cont_1" escape="true" name="us-gaap:ScheduleOfConversionsOfStockTextBlock" id="ixv-36465">At December&#160;31, 2023 and 2022, convertible
preferred stock consisted of the following:</ix:nonNumeric></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

<ix:continuation id="_ScheduleOfConversionsOfStockTextBlock-c40_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
    <td style="padding-bottom: 1.5pt">&#160;</td><td style="padding-bottom: 1.5pt">&#160;</td>
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  </table></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Series 1 Convertible Preferred Stock &#8211; The
Company issued <ix:nonFraction contextRef="c592" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SharesIssued" scale="0" unitRef="shares" id="ixv-36476">100</ix:nonFraction> shares of Series 1 preferred stock (&#8220;Series 1 Preferred Stock&#8221;) in 2018, which was subsequently converted
on November 14, 2019 into <ix:nonFraction contextRef="c306" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockSharesIssued" scale="0" unitRef="shares" id="ixv-36477">2,845,597</ix:nonFraction> shares of Series A Preferred Stock. There were no shares of Series 1 Preferred Stock outstanding in
the years ended December 31, 2023 or 2022.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Series Seed and Series A Preferred Stock &#8211;
Holders have various rights and preferences as follows:</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Voting rights</b> &#8211; The holders of convertible
preferred stock are entitled to vote on all matters on which the common stockholders are entitled to vote. Holders of convertible preferred
stock and common stock vote together as a single class. Each holder of convertible preferred stock is entitled to the number of votes
equal to the number of shares of common stock into which the shares held by such holder are convertible.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Dividends</b> &#8211; Dividends are payable
when and if declared by the board of directors (the &#8220;Board of Directors&#8221;), and preferred stockholders have preference over
common stockholders for the payment of dividends. The holders of Series&#160;Seed Preferred Stock and Series&#160;A Preferred Stock are
entitled to receive, when and if declared by the Board of Directors, noncumulative dividends at a rate of $<ix:nonFraction contextRef="c593" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockPerShareAmountsOfPreferredDividendsInArrears" scale="0" unitRef="usdPershares" id="ixv-36478">0.0645</ix:nonFraction> and $<ix:nonFraction contextRef="c40" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockPerShareAmountsOfPreferredDividendsInArrears" scale="0" unitRef="usdPershares" id="ixv-36479">0.1406</ix:nonFraction>, respectively,
per share, per annum, adjustable for certain events, such as stock splits and combinations. No dividends have been declared or paid by
the Company to date.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p></ix:nonNumeric><div>

</div><div>


</div><!-- Field: Page; Sequence: 261; Value: 46 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->61<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CERo Therapeutics, Inc.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b></p><div>

</div><ix:continuation id="_PreferredStockTextBlock-c40_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Liquidation</b> &#8211; Upon the occurrence
of a liquidation, dissolution, or winding up of the Company, either voluntary or involuntary, the holders of Series&#160;A Preferred Stock
then outstanding shall be entitled to be paid, out of the available funds and assets, and prior and in preference to any payment or distribution
of any such funds on any shares of Series&#160;Seed Preferred Stock, and common stock, an amount per share equal to $<ix:nonFraction contextRef="c23" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:SaleOfStockPricePerShare" scale="0" unitRef="usdPershares" id="ixv-36480">1.7571</ix:nonFraction>, plus all
declared but unpaid dividends.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Upon the completion of the distribution described
above, the holders of Series&#160;Seed Preferred Stock then outstanding shall be entitled to receive, out of the available funds and assets,
in preference to any distribution of any of the assets to holders of common stock, an amount equal to the original issue price for such
series of convertible preferred stock, $<ix:nonFraction contextRef="c589" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockConvertibleConversionPrice" scale="0" unitRef="usdPershares" id="ixv-36481">0.8059</ix:nonFraction>, plus any declared but unpaid dividends.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Thereafter, any remaining proceeds shall be distributed
among the holders of common stock pro rata based on the number of shares held by each such holder.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Conversion</b> &#8211; Each share of convertible
preferred stock is convertible into common stock: (i)&#160;at the option of the holder; (ii)&#160;at the closing of an initial public
offering of the Company&#8217;s common stock at a price not less than $<ix:nonFraction contextRef="c40" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:CommonStockConvertibleConversionPriceDecrease" scale="0" unitRef="usdPershares" id="ixv-36482">3.5142</ix:nonFraction> per share and having aggregate cash proceeds of not less
than $<ix:nonFraction contextRef="c40" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ConversionOfStockAmountIssued1" scale="0" unitRef="usd" id="ixv-36483">60,000,000</ix:nonFraction>; and (iii)&#160;at the date specified by written consent or agreement of the holders of at least <ix:nonFraction contextRef="c40" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardPercentageOfOutstandingStockMaximum" scale="-2" unitRef="pure" id="ixv-36484">60</ix:nonFraction>% of the outstanding
shares of Series&#160;A Preferred Stock, voting together as a single class. The conversion ratio for the conversion in the above scenarios
is currently <ix:nonFraction contextRef="c23" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:LoansAndLeasesReceivableRatioOfNonperformingLoansToAllLoans" scale="-2" unitRef="pure" id="ixv-36485">100</ix:nonFraction>%, determined by dividing the original issue price per share by the conversion price per share, which are each $<ix:nonFraction contextRef="c23" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockConvertibleConversionPrice" scale="0" unitRef="usdPershares" id="ixv-36486">0.8059</ix:nonFraction>
for Series Seed Preferred Stock and each $<ix:nonFraction contextRef="c557" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockParOrStatedValuePerShare" scale="0" unitRef="usdPershares" id="ixv-36487">1.7571</ix:nonFraction> for Series A Preferred Stock.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Redemption</b> &#8211; Convertible preferred
stock is not mandatorily redeemable and is contingently redeemable only on defined liquidation events not solely in the control of the
Company and without fixed or determinable dates.</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c40" escape="true" name="cero:ConvertiblePreferredStockWarrantLiabilityTextBlock" id="ixv-32732"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.7pt; text-align: justify; text-indent: -49.7pt"><span style="text-transform: uppercase"><b>NOTE
8 &#8211; CONVERTIBLE PREFERRED STOCK Warrant liability</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On November 14, 2019, the Company issued warrants
to purchase a total of <ix:nonFraction contextRef="c596" decimals="0" format="ixt:num-dot-decimal" name="cero:WarrantsPurchase" scale="0" unitRef="shares" id="ixv-36488">1,849,638</ix:nonFraction> shares of Series A Preferred Stock at a price of $<ix:nonFraction contextRef="c597" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:SharesIssuedPricePerShare" scale="0" unitRef="usdPershares" id="ixv-36489">1.7571</ix:nonFraction> per share. The warrants are exercisable into
shares of Series&#160;A Preferred Stock at the discretion of the holder, at any time in the <ix:nonNumeric contextRef="c596" format="ixt-sec:durwordsen" name="cero:IssuanceOfPreferredStock" id="ixv-36490">five years</ix:nonNumeric> after issuance. The warrants were
analyzed and determined to be freestanding instruments issued in a transaction including the conversion or sale of Series A Preferred
Stock. A warrant to purchase up to <ix:nonFraction contextRef="c598" decimals="0" format="ixt:num-dot-decimal" name="cero:WarrantsPurchase" scale="0" unitRef="shares" id="ixv-36491">426,839</ix:nonFraction> shares of Series A Preferred Stock was issued in a transaction that included the conversion
of <ix:nonFraction contextRef="c596" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ConversionOfStockSharesIssued1" scale="0" unitRef="shares" id="ixv-36492">100</ix:nonFraction> shares of Series 1 Preferred Stock into <ix:nonFraction contextRef="c599" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockSharesIssued" scale="0" unitRef="shares" id="ixv-36493">2,845,597</ix:nonFraction> shares of Series A Preferred Stock. Another warrant to purchase up to <ix:nonFraction contextRef="c600" decimals="0" format="ixt:num-dot-decimal" name="cero:WarrantsPurchase" scale="0" unitRef="shares" id="ixv-36494">1,422,799</ix:nonFraction>
shares of Series A Preferred Stock was issued concurrent with the purchase of <ix:nonFraction contextRef="c596" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:StockRepurchasedDuringPeriodShares" scale="0" unitRef="shares" id="ixv-36495">2,845,597</ix:nonFraction> shares of Series A Preferred Stock. These warrants
are collectively are referred to as the &#8220;preferred stock warrants.&#8221; On February 14, 2024, the preferred stock warrants were
converted into warrants to purchase up to <ix:nonFraction contextRef="c317" decimals="0" format="ixt:num-dot-decimal" name="cero:WarrantsPurchase" scale="0" unitRef="shares" id="ixv-36496">324,999</ix:nonFraction> shares of New CERo Common Stock.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company initially recorded the warrants at
fair value as valued by a third-party appraiser, who estimated fair value using with estimates of the value and volatility of the Company&#8217;s
Series A Preferred Stock as well as estimation of the risk-free rate. <ix:nonNumeric contextRef="c40" continuedAt="_FairValueAssetsAndLiabilitiesMeasuredOnRecurringAndNonrecurringBasisValuationTechniquesTableTextBlock-c40_cont_1" escape="true" name="us-gaap:FairValueAssetsAndLiabilitiesMeasuredOnRecurringAndNonrecurringBasisValuationTechniquesTableTextBlock" id="ixv-36497">The appraiser subsequently estimated the fair value of the preferred
stock warrants at December&#160;31, 2023 and 2022, using Black-Scholes with the following assumptions:</ix:nonNumeric></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

<ix:continuation id="_FairValueAssetsAndLiabilitiesMeasuredOnRecurringAndNonrecurringBasisValuationTechniquesTableTextBlock-c40_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td style="text-align: center">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2023</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left">Risk-free interest rate</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c313" decimals="1" format="ixt:num-dot-decimal" name="us-gaap:DerivativeLiabilityMeasurementInput" scale="0" unitRef="pure" id="ixv-36498">5.4</ix:nonFraction></td><td style="width: 1%; text-align: left">%</td><td style="width: 1%">&#160;</td>
    <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c601" decimals="1" format="ixt:num-dot-decimal" name="us-gaap:DerivativeLiabilityMeasurementInput" scale="0" unitRef="pure" id="ixv-36499">4.7</ix:nonFraction></td><td style="width: 1%; text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Expected life (in years)</td><td>&#160;</td>
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    <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c602" decimals="1" format="ixt:num-dot-decimal" name="us-gaap:DerivativeLiabilityMeasurementInput" scale="0" unitRef="pure" id="ixv-36501">1.0</ix:nonFraction></td><td style="text-align: left">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="text-align: left">Expected dividend yield</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-334">-</div></td><td style="text-align: left">%</td><td>&#160;</td>
    <td style="text-align: left">&#160;</td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-335">-</div></td><td style="text-align: left">%</td></tr>
  <tr style="vertical-align: bottom; background-color: White">
    <td style="text-align: left">Expected volatility</td><td>&#160;</td>
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  </table></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At December&#160;31, 2023 and 2022, the preferred
stock warrants were exercisable and remained outstanding.</p></ix:nonNumeric><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.7pt; text-align: justify; text-indent: -49.7pt"><span style="text-transform: uppercase"><b>&#160;</b></span></p><div>


</div><!-- Field: Page; Sequence: 262; Value: 46 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->62<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>&#160;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CERo Therapeutics, Inc.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.7pt; text-align: center; text-indent: -49.7pt"><span style="text-transform: uppercase"><b>&#160;</b></span></p><div>

</div><ix:nonNumeric contextRef="c40" escape="true" name="cero:CommonStockTextBlock" id="ixv-32828"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.7pt; text-align: justify; text-indent: -49.7pt"><span style="text-transform: uppercase"><b>NOTE
9 &#8211; COMMON STOCK</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In September 2016, the Company issued <ix:nonFraction contextRef="c605" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodSharesNewIssues" scale="0" unitRef="shares" id="ixv-36504">8,500,000</ix:nonFraction>
shares of common stock to the founders (&#8220;Founder Stock&#8221;) in exchange for consideration payable by cash and by transfer of
certain technology and related rights owned by the founders. The Founder Stock vested ratably over a four-year period following the date
of issuance. As of December 31, 2022, all Founders Stock was fully vested.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The holders of common stock are also entitled
to receive dividends whenever funds are legally available, when and if declared by the Board of Directors. As of December&#160;31, 2023,
dividends have never been declared.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><ix:nonNumeric contextRef="c40" continuedAt="_ScheduleOfCommonStockOutstandingRollForwardTableTextBlock-c40_cont_1" escape="true" name="us-gaap:ScheduleOfCommonStockOutstandingRollForwardTableTextBlock" id="ixv-36505">At December&#160;31, 2023 and 2022, the Company
had reserved common stock for future issuance as follows:</ix:nonNumeric></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

<ix:continuation id="_ScheduleOfCommonStockOutstandingRollForwardTableTextBlock-c40_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="6" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2023</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td>
    <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="width: 76%; text-align: left">Convertible preferred stock, authorized but not yet issued</td><td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  </table></ix:continuation></ix:nonNumeric><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

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10 &#8211; STOCK-BASED COMPENSATION</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In October 2016, the Company&#8217;s Board of
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The EIP provides for the grant of incentive and
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The intrinsic value of options exercised during
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</div><div>


</div><!-- Field: Page; Sequence: 263; Value: 46 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->63<!-- Field: /Sequence --></span></p></div><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CERo Therapeutics, Inc.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

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estimated the fair value of stock options granted during the year ended December&#160;31, 2022, using Black-Scholes with the following
weighted average assumptions:</ix:nonNumeric></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

<ix:continuation id="_ScheduleOfShareBasedPaymentAwardStockOptionsValuationAssumptionsTableTextBlock-c40_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td>&#160;</td><td style="font-weight: bold; padding-bottom: 1.5pt">&#160;</td> <td colspan="2" style="font-weight: bold; text-align: center; border-bottom: Black 1.5pt solid">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="width: 88%; text-align: left">Risk-free interest rate</td><td style="width: 1%">&#160;</td> <td style="width: 1%; text-align: left">&#160;</td><td style="width: 9%; text-align: right"><ix:nonFraction contextRef="c41" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardFairValueAssumptionsRiskFreeInterestRate" scale="-2" unitRef="pure" id="ixv-36536">2.28</ix:nonFraction></td><td style="width: 1%; text-align: left">%</td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Expected life (in years)</td><td>&#160;</td> <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonNumeric contextRef="c41" format="ixt-sec:duryear" name="us-gaap:SharebasedCompensationArrangementBySharebasedPaymentAwardFairValueAssumptionsExpectedTerm1" id="ixv-36537">8.30</ix:nonNumeric></td><td style="text-align: left">&#160;</td></tr> <tr style="vertical-align: bottom; background-color: rgb(204,238,255)"> <td style="text-align: left">Expected dividend yield</td><td>&#160;</td> <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c41" decimals="3" format="ixt:num-dot-decimal" name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardFairValueAssumptionsExpectedDividendRate" scale="-2" unitRef="pure" id="ixv-36538">0.0</ix:nonFraction></td><td style="text-align: left">%</td></tr> <tr style="vertical-align: bottom; background-color: White"> <td style="text-align: left">Estimated volatility</td><td>&#160;</td> <td style="text-align: left">&#160;</td><td style="text-align: right"><ix:nonFraction contextRef="c41" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:ShareBasedCompensationArrangementByShareBasedPaymentAwardFairValueAssumptionsExpectedVolatilityRate" scale="-2" unitRef="pure" id="ixv-36539">71.31</ix:nonFraction></td><td style="text-align: left">%</td></tr> </table></ix:continuation>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in">&#160;</p>

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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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  </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The expected stock price volatility assumption was determined by examining the historical volatilities for industry peers, as the Company does not have any public trading history for the Company&#8217;s common stock. The Company will continue to analyze the historical stock price volatility and expected term assumption as more historical data for the Company&#8217;s common stock becomes available.</span></td></tr>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
    <td style="width: 0.25in">&#160;</td>
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the year ended December&#160;31, 2023, the
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and administrative.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the year ended December&#160;31, 2022, the
Company recorded stock-based compensation expense of $<ix:nonFraction contextRef="c41" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AllocatedShareBasedCompensationExpense" scale="0" unitRef="usd" id="ixv-36544">381,070</ix:nonFraction>, of which $<ix:nonFraction contextRef="c610" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AllocatedShareBasedCompensationExpense" scale="0" unitRef="usd" id="ixv-36545">294,164</ix:nonFraction> was related to R&amp;D and $<ix:nonFraction contextRef="c611" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:AllocatedShareBasedCompensationExpense" scale="0" unitRef="usd" id="ixv-36546">86,906</ix:nonFraction> was related to general
and administrative.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December&#160;31, 2023, there was $<ix:nonFraction contextRef="c24" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:UnamortizedDebtIssuanceExpense" scale="0" unitRef="usd" id="ixv-36547">79,526</ix:nonFraction>
of unamortized stock-based compensation cost related to unvested stock options, which is expected to be recognized over a weighted average
period of <ix:nonNumeric contextRef="c40" format="ixt-sec:duryear" name="us-gaap:SharebasedCompensationArrangementBySharebasedPaymentAwardOptionsVestedAndExpectedToVestExercisableWeightedAverageRemainingContractualTerm1" id="ixv-36548">1.05</ix:nonNumeric> years. No options were granted in 2023, and the weighted average grant date calculated fair value per share of options
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.7pt; text-indent: -49.7pt"><span style="text-transform: uppercase"><b>&#160;</b></span></p><div>

</div><ix:nonNumeric contextRef="c40" continuedAt="_IncomeTaxDisclosureTextBlock-c40_cont_1" escape="true" name="us-gaap:IncomeTaxDisclosureTextBlock" id="ixv-33132"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.7pt; text-indent: -49.7pt"><span style="text-transform: uppercase"><b>NOTE
11 &#8211; INCOME TAXES</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><ix:nonNumeric contextRef="c40" continuedAt="cero_ScheduleOfNetDeferredTaxAssetsTableTextBlock-c40_cont_1" escape="true" name="cero:ScheduleOfNetDeferredTaxAssetsTableTextBlock" id="ixv-36550">The components of the net deferred tax assets were approximately as
follows as of December&#160;31, 2023 and 2022:</ix:nonNumeric></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

<ix:continuation id="cero_ScheduleOfNetDeferredTaxAssetsTableTextBlock-c40_cont_1"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: bottom">
    <td>&#160;</td>
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    <td>&#160;</td>
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    <td style="width: 1%">&#160;</td>
    <td style="width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</span></td>
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    <td style="width: 1%">&#160;</td>
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  <tr style="vertical-align: bottom">
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    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
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  <tr style="vertical-align: bottom; background-color: #CCEEFF">
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    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom">
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    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Right of use asset</span></td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c41" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:FinanceLeaseRightOfUseAssetAmortization" scale="0" unitRef="usd" id="ixv-36560">598,000</ix:nonFraction></span></td>
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  <tr style="vertical-align: bottom">
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    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom; background-color: #CCEEFF">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Accruals and others</span></td>
    <td>&#160;</td>
    <td style="border-bottom: black 1.5pt solid">&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td></tr>
  <tr style="vertical-align: bottom">
    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td>&#160;</td>
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    <td>&#160;</td></tr>
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    <td>&#160;</td>
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    <td style="border-bottom: black 1.5pt solid; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c23" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsValuationAllowance" scale="0" unitRef="usd" id="ixv-36567">13,603,000</ix:nonFraction></span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
    <td>&#160;</td>
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    <td style="border-bottom: black 1.5pt solid; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(<ix:nonFraction contextRef="c24" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsValuationAllowance" scale="0" unitRef="usd" id="ixv-36568">9,170,000</ix:nonFraction></span></td>
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  <tr style="vertical-align: bottom">
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    <td>&#160;</td>
    <td style="border-bottom: black 4.5pt double"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</span></td>
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    <td>&#160;</td>
    <td>&#160;</td>
    <td style="border-bottom: black 4.5pt double"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</span></td>
    <td style="border-bottom: black 4.5pt double; text-align: right"><span style="-sec-ix-hidden: hidden-fact-337; font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td>
    <td>&#160;</td></tr>
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</div><div>


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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->64<!-- Field: /Sequence --></span></p></div><div>
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    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CERo Therapeutics, Inc.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation id="_IncomeTaxDisclosureTextBlock-c40_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company has incurred significant tax losses
since inception. Based on the available objective evidence, management cannot conclude it is more likely than not that the net deferred
tax assets will be fully realizable. Accordingly, the Company has provided a full valuation allowance against its net deferred tax assets.
For the years ended December 31, 2023 and 2022, the valuation allowance increased by approximately $<ix:nonFraction contextRef="c40" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ValuationAllowanceDeferredTaxAssetChangeInAmount" scale="0" unitRef="usd" id="ixv-36569">4,433,000</ix:nonFraction> and $<ix:nonFraction contextRef="c41" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ValuationAllowanceDeferredTaxAssetChangeInAmount" scale="0" unitRef="usd" id="ixv-36570">2,964,000</ix:nonFraction>, respectively.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At December 31, 2023, the Company has federal
net operating loss carryforwards of approximately $<ix:nonFraction contextRef="c23" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsOperatingLossCarryforwardsForeign" scale="0" unitRef="usd" id="ixv-36571">727,000</ix:nonFraction> that begin to expire in 2036. The Company also has federal net operating losses
of $<ix:nonFraction contextRef="c40" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:FederalStateAndLocalIncomeTaxExpenseBenefitContinuingOperations" scale="0" unitRef="usd" id="ixv-36572">28,973,000</ix:nonFraction> that arose after the 2017 tax year that will carry forward indefinitely and the utilization of which is limited to <ix:nonFraction contextRef="c40" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:EffectiveIncomeTaxRateContinuingOperations" scale="-2" unitRef="pure" id="ixv-36573">80</ix:nonFraction>%
of taxable income for tax years beginning after 2021. The Company has state net operating loss carryforwards of approximately $<ix:nonFraction contextRef="c23" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:OperatingLossCarryforwards" scale="0" unitRef="usd" id="ixv-36574">40,522,000</ix:nonFraction>
that will begin to expire in 2036.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Under the Tax Reform Act of 1986, the amounts
of and benefits from net operating loss carry forwards may be impaired or limited in certain circumstances. Events which cause limitations
in the amount of net operating losses that the Company may utilize in any one year include, but are not limited to, a cumulative ownership
change of more than <ix:nonFraction contextRef="c40" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:SubsidiaryOrEquityMethodInvesteeCumulativePercentageOwnershipAfterAllTransactions" scale="-2" unitRef="pure" id="ixv-36575">50</ix:nonFraction>%, as defined, over a three-year period. The impact of any limitations that may be imposed due to such ownership
changes has not been determined.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2023, the Company has research
credit carry forwards of approximately $<ix:nonFraction contextRef="c23" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:DeferredTaxAssetsTaxCreditCarryforwardsResearch" scale="0" unitRef="usd" id="ixv-36576">930,000</ix:nonFraction> and $<ix:nonFraction contextRef="c40" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CurrentFederalStateAndLocalTaxExpenseBenefit" scale="0" unitRef="usd" id="ixv-36577">1,296,000</ix:nonFraction> for federal and state tax purposes, respectively. If not utilized, the
federal carryforward will expire in various amounts beginning in 2040. The California credits can be carried forward indefinitely. The
Company has not undertaken a detailed analysis of all amounts claimed as research credits for federal or state tax purposes. As a result,
amounts ultimately realized for research credits were included in management&#8217;s consideration of uncertain tax benefits.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2023 and 2022, the Company
had an unrecognized tax benefit balance of approximately $<ix:nonFraction contextRef="c23" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:UnrecognizedTaxBenefits" scale="0" unitRef="usd" id="ixv-36578">459,000</ix:nonFraction> and $<ix:nonFraction contextRef="c24" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:UnrecognizedTaxBenefits" scale="0" unitRef="usd" id="ixv-36579">427,000</ix:nonFraction>, respectively, related to R&amp;D credits.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">No amount of unrecognized tax benefits as of December
31, 2023 and 2022, if recognized, would reduce the Company&#8217;s effective tax rate because the benefits would be in the form of tax
credit carryforwards, which would attract a full valuation allowance. There are no provisions for which it is reasonably possible that
the total amounts of unrecognized tax benefits will significantly increase or decrease within 12 months of the reporting date. Because
the statute of limitations does not expire until after the net operating loss and credit carryforwards are actually used, the statutes
are still open on calendar years ended 2016 and 2017 forward for federal and state purposes.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company did not recognize any expense for
interest and penalties related to uncertain tax positions during 2023 and 2022, and the Company does not have any amounts related to interest
and penalties accrued at December 31, 2023 and 2022.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company files U.S. federal and state tax returns.
The Company&#8217;s tax years will remain open for examination by the federal and state authorities for three and four years, respectively,
from the date of utilization of any net operating loss credit.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

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of the liability for uncertain tax positions, excluding potential interest and penalties, is as follows:</ix:nonNumeric></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p>

<ix:continuation id="_ScheduleOfUnrecognizedTaxBenefitsRollForwardTableTextBlock-c40_cont_1"><table cellpadding="0" cellspacing="0" style="border-collapse: collapse; width: 100%; font: 10pt Times New Roman, Times, Serif">
  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
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  <tr style="vertical-align: bottom; background-color: White">
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  <tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
    <td style="padding-bottom: 1.5pt">Balance as of December 31, 2023</td><td style="padding-bottom: 1.5pt">&#160;</td>
    <td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><ix:nonFraction contextRef="c23" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:UnrecognizedTaxBenefits" scale="0" unitRef="usd" id="ixv-36584">459,000</ix:nonFraction></td><td style="padding-bottom: 1.5pt; text-align: left">&#160;</td></tr>
  </table></ix:continuation></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>&#160;</b></span></p><div>


</div><!-- Field: Page; Sequence: 265; Value: 46 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->65<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-transform: uppercase"><b>&#160;</b></span></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CERo Therapeutics, Inc.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.7pt; text-indent: -49.7pt"><span style="text-transform: uppercase"><b>&#160;</b></span></p><div>

</div><ix:nonNumeric contextRef="c40" escape="true" name="us-gaap:CollaborativeArrangementDisclosureTextBlock" id="ixv-33392"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.7pt; text-align: justify; text-indent: -49.7pt"><span style="text-transform: uppercase"><b>NOTE
12 &#8211; COLLABORATIVE AGREEMENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company entered into a Collaboration and Option
Agreement (the &#8220;Collaboration Agreement&#8221;) dated March 3, 2020. The Collaboration Agreement granted a royalty-free, nonexclusive,
worldwide license to share each party&#8217;s technologies to create bi-functional T-cells. The Company was responsible for all employee
and other internal costs incurred in the performance of all the Company&#8217;s R&amp;D activities, with approved cost overruns funded
by the collaborative partner. At the end of the research project, the collaborative partner will be granted the option to enter into an
exclusive license for the further development of the combined drug. The Company recognizes the allocation of the costs incurred with respect
to the jointly conducted activities as a component of the related expense in the period incurred. The Company ensured that the presentation,
classification, and disclosure requirements related to the Collaboration Agreement were followed. Costs incurred related to the Collaboration
Agreement are included in R&amp;D costs in the statements of operations, and expense reimbursements of approximately $<ix:nonFraction contextRef="c40" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProfessionalAndContractServicesExpense" scale="0" unitRef="usd" id="ixv-36585">0</ix:nonFraction> and $<ix:nonFraction contextRef="c41" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ProfessionalAndContractServicesExpense" scale="0" unitRef="usd" id="ixv-36586">182,577</ix:nonFraction> were
netted against those costs for the years ended December&#160;31, 2023 and 2022, respectively. The Collaboration Agreement was terminated
on March 3, 2023.</p></ix:nonNumeric><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c40" escape="true" name="us-gaap:PensionAndOtherPostretirementBenefitsDisclosureTextBlock" id="ixv-33401"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.7pt; text-align: justify; text-indent: -49.7pt"><span style="text-transform: uppercase"><b>NOTE
13 &#8211; 401(k) RETIREMENT SAVINGS PLAN</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company sponsors a 401(k) defined contribution
plan covering eligible employees who elect to participate. The Company is allowed to make discretionary profit sharing and 401(k) matching
contributions as defined in the plan and as approved by the Board of Directors. The Company made $<ix:nonFraction contextRef="c40" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:EmployeeStockOwnershipPlanESOPCashContributionsToESOP" scale="0" unitRef="usd" id="ixv-36587">63,344</ix:nonFraction> and $<ix:nonFraction contextRef="c41" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:EmployeeStockOwnershipPlanESOPCashContributionsToESOP" scale="0" unitRef="usd" id="ixv-36588">139,804</ix:nonFraction> contributions during
2023 and 2022, respectively.</p></ix:nonNumeric><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c40" escape="true" name="us-gaap:RelatedPartyTransactionsDisclosureTextBlock" id="ixv-33410"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.7pt; text-align: justify; text-indent: -49.7pt"><span style="text-transform: uppercase"><b>NOTE
14 &#8211; RELATED-PARTY TRANSACTIONS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">A founder, investor and board observer, has a
family relation with the chief executive officer and the chief financial officer in office in 2022. At December&#160;31, 2023, this individual
maintained <ix:nonFraction contextRef="c613" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:RelatedPartyTransactionRate" scale="-2" unitRef="pure" id="ixv-36589">16.33</ix:nonFraction>% of the outstanding and <ix:nonFraction contextRef="c614" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:RelatedPartyTransactionRate" scale="-2" unitRef="pure" id="ixv-36590">14.99</ix:nonFraction>% of the fully diluted ownership of the Company. In addition, this individual was under
a consulting contract in 2022 to advise on research and clinical strategy as the head of the scientific advisory board, for which the
individual was paid $<ix:nonFraction contextRef="c41" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RelatedPartyTransactionAmountsOfTransaction" scale="0" unitRef="usd" id="ixv-36591">50,000</ix:nonFraction> in the year ending December 31, 2022 and $<ix:nonFraction contextRef="c40" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:RelatedPartyTransactionAmountsOfTransaction" scale="0" unitRef="usd" id="ixv-36592">0</ix:nonFraction> in 2023.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">An investor had a working relationship with the
Company under the Collaboration Agreement described in Note 11 and was actively collaborating with the Company in the year ended December
31, 2022. At December&#160;31, 2023, this investor maintained <ix:nonFraction contextRef="c615" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:RelatedPartyTransactionRate" scale="-2" unitRef="pure" id="ixv-36593">7.69</ix:nonFraction>% of the outstanding and <ix:nonFraction contextRef="c40" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:RelatedPartyTransactionRate" scale="-2" unitRef="pure" id="ixv-36594">9.89</ix:nonFraction>% of the fully diluted ownership of the
Company.</p></ix:nonNumeric><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:nonNumeric contextRef="c40" continuedAt="_SubsequentEventsTextBlock-c40_cont_1" escape="true" name="us-gaap:SubsequentEventsTextBlock" id="ixv-33421"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 49.7pt; text-align: justify; text-indent: -49.7pt"><span style="text-transform: uppercase"><b>NOTE
15 &#8211; SUBSEQUENT EVENTS</b></span></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Business Combination</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On February 5, 2024, the Company, PBAX and Merger
Sub entered into Amendment No. 1 to the Business Combination Agreement (the &#8220;First BCA Amendment&#8221;) to, among other things,
(i) remove the minimum cash condition, (ii) modify the stock-price based milestones such that (a) the trading price condition for the
First Level Earnout Target (as defined in the First BCA Amendment) shall be reset from $<ix:nonFraction contextRef="c616" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockConvertibleConversionPrice" scale="0" unitRef="usdPershares" id="ixv-36595">12.50</ix:nonFraction> to <ix:nonFraction contextRef="c617" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentConvertibleThresholdPercentageOfStockPriceTrigger" scale="-2" unitRef="pure" id="ixv-36596">125</ix:nonFraction>% of the reset Conversion Price (as
defined in the First BCA Amendment) of the New CERo Series A Preferred Stock (as defined below) and (b) the trading price condition for
the Second Level Earnout Target (as defined in the First BCA Amendment) shall be reset from $<ix:nonFraction contextRef="c618" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockConvertibleConversionPrice" scale="0" unitRef="usdPershares" id="ixv-36597">15.00</ix:nonFraction> to <ix:nonFraction contextRef="c619" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:DebtInstrumentConvertibleThresholdPercentageOfStockPriceTrigger" scale="-2" unitRef="pure" id="ixv-36598">150</ix:nonFraction>% of the reset Conversion Price
of New CERo Series A Preferred Stock, and (iii) increase the aggregate number of shares of PBAX Class A common stock, par value $<ix:nonFraction contextRef="c620" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:CommonStockParOrStatedValuePerShare" scale="0" unitRef="usdPershares" id="ixv-36599">0.0001</ix:nonFraction>
per share (&#8220;Class A common stock&#8221;), issuable to the stockholders of the Company in connection with the Business Combination
from <ix:nonFraction contextRef="c621" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:BusinessAcquisitionEquityInterestsIssuedOrIssuableNumberOfSharesIssued" scale="0" unitRef="shares" id="ixv-36600">4,651,704</ix:nonFraction> shares to <ix:nonFraction contextRef="c622" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:BusinessAcquisitionEquityInterestsIssuedOrIssuableNumberOfSharesIssued" scale="0" unitRef="shares" id="ixv-36601">5,000,000</ix:nonFraction> shares. Such number of shares is in addition to up to <ix:nonFraction contextRef="c531" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodSharesNewIssues" scale="0" unitRef="shares" id="ixv-36602">1,200,000</ix:nonFraction> shares issuable upon satisfaction of
certain earn-out conditions and <ix:nonFraction contextRef="c623" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:StockIssuedDuringPeriodSharesStockOptionsExercised" scale="0" unitRef="shares" id="ixv-36603">382,651</ix:nonFraction> shares issuable upon exercise of rollover options or warrants.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:nonNumeric><div>

</div><div>


</div><!-- Field: Page; Sequence: 266; Value: 46 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->66<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CERo Therapeutics, Inc.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><ix:continuation continuedAt="_SubsequentEventsTextBlock-c40_cont_2" id="_SubsequentEventsTextBlock-c40_cont_1"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On February 8, 2024, PBAX held a special meeting
of stockholders (the &#8220;Fourth Special Meeting&#8221;). At the Fourth Special Meeting, PBAX&#8217;s stockholders adopted and approved
(i) the Business Combination Agreement, pursuant to which Merger Sub merged with and into the Company, with the Company surviving as a
wholly-owned subsidiary of PBAX and approved the Business Combination and the other transactions and ancillary documents contemplated
by and required for the Business Combination; (ii) on a non-binding advisory basis, certain changes to the amended and restated charter
of PBAX, including the name change of Phoenix Biotech Acquisition Corp. to CERo Therapeutics Holdings, Inc., share authorizations, and
others; (iii) the issuance of Class A common stock to the Company&#8217;s stockholders pursuant to the Business Combination Agreement;
(iv) the election of five directors; and (v) the 2024 Equity Incentive Plan and the 2024 Employee Stock Purchase Plan (in each case, as
defined in the Business Combination Agreement), contingent of the consummation of the Business Combination.&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In connection with the approval of the Business
Combination, holders of <ix:nonFraction contextRef="c624" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:BusinessAcquisitionEquityInterestsIssuedOrIssuableNumberOfSharesIssued" scale="0" unitRef="shares" id="ixv-36604">671,285</ix:nonFraction> shares of Class A common stock, exercised redemption rights. As a result, following satisfaction of such
redemptions, PBAX had <ix:nonFraction contextRef="c625" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesOutstanding" scale="0" unitRef="shares" id="ixv-36605">5,563,297</ix:nonFraction> shares of Class A common stock outstanding, of which (i) <ix:nonFraction contextRef="c626" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesIssued" scale="0" unitRef="shares" id="ixv-36606">82,047</ix:nonFraction> were shares of Class A common stock issued
to the public in its initial public offering (&#8220;IPO&#8221;), which shares of Class A common stock were entitled to receive a pro
rata portion of the remaining funds in the PBAX trust account in connection with its initial business combination, a liquidation or certain
other events, (ii) <ix:nonFraction contextRef="c532" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:ConversionOfStockSharesIssued1" scale="0" unitRef="shares" id="ixv-36607">4,596,250</ix:nonFraction> were shares of Class A common stock issued upon the conversion of an equal number of shares of PBAX Class
B common stock, par value $<ix:nonFraction contextRef="c627" decimals="4" format="ixt:num-dot-decimal" name="us-gaap:CommonStockParOrStatedValuePerShare" scale="0" unitRef="usdPershares" id="ixv-36608">0.0001</ix:nonFraction> per share (&#8220;Class B common stock&#8221;), acquired by Phoenix Biotech Sponsor, LLC (the &#8220;Sponsor&#8221;)
prior to its IPO, which shares of Class A common stock did not have redemption rights, and (iii) <ix:nonFraction contextRef="c628" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:CommonStockSharesIssued" scale="0" unitRef="shares" id="ixv-36609">885,000</ix:nonFraction> were shares of Class A common
stock included in the private placement units acquired in the private placement by the Sponsor and other investors concurrent with the
PBAX IPO, which shares of Class A common stock did not have redemption rights. On February 14, 2024, PBAX made a series of payments of
an aggregate of $<ix:nonFraction contextRef="c536" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:StockRedeemedOrCalledDuringPeriodValue" scale="0" unitRef="usd" id="ixv-36610">7,456,463.30</ix:nonFraction> to holders of redeemed Class A common stock (an aggregate of $<ix:nonFraction contextRef="c537" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:TemporaryEquityRedemptionPricePerShare" scale="0" unitRef="usdPershares" id="ixv-36611">11.11</ix:nonFraction> per redeemed share).</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On February 13, 2024, the Company, PBAX and Merger
Sub entered into Amendment No. 2 to the Business Combination Agreement to create two additional pools of earnout shares (the &#8220;Earnout
Shares&#8221;) of Class A common stock, one pool of which will contain <ix:nonFraction contextRef="c629" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SharebasedCompensationArrangementBySharebasedPaymentAwardOptionsVestedNumberOfShares" scale="0" unitRef="shares" id="ixv-36612">875,000</ix:nonFraction> shares, which will be fully vested at closing of the Business
Combination and which are being issued as an offset to the agreement by Sponsor to forfeit an offsetting number of shares, and one pool
of which will contain <ix:nonFraction contextRef="c630" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SharebasedCompensationArrangementBySharebasedPaymentAwardOptionsVestedNumberOfShares" scale="0" unitRef="shares" id="ixv-36613">1,000,000</ix:nonFraction> shares, which will be fully vested upon the achievement of certain regulatory milestone-based earnout
targets and make certain other technical changes to the timing and process for issuance of the <ix:nonFraction contextRef="c631" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SharesIssued" scale="0" unitRef="shares" id="ixv-36614">1,200,000</ix:nonFraction> shares of Class A common stock
subject to the other earn-out conditions set forth in the Business Combination Agreement.</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Business Combination closed on February 14,
2024, at which time the following occurred:</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top"> <td style="width: 0.25in">&#160;</td> <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">1.</span></td> <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Each outstanding share of the Company&#8217;s convertible preferred stock was converted into the number of shares of Class A common stock calculated by dividing the liquidation preference by $<ix:nonFraction contextRef="c632" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockLiquidationPreference" scale="0" unitRef="usdPershares" id="ixv-36615">10.00</ix:nonFraction>.</span></td></tr> </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top"> <td style="width: 0.25in">&#160;</td> <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">2.</span></td> <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Each outstanding share of the Company&#8217;s common stock was converted into the number of shares of Class A common stock calculated by multiplying each share by the exchange ratio (the &#8220;Exchange Ratio&#8221;). The Exchange Ratio of <ix:nonFraction contextRef="c537" decimals="6" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockConvertibleConversionRatio" scale="0" unitRef="pure" id="ixv-36616">0.064452</ix:nonFraction> was calculated by first subtracting the aggregate liquidation preference of outstanding preferred shares from $<ix:nonFraction contextRef="c537" decimals="-6" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockValueOutstanding" scale="6" unitRef="usd" id="ixv-36617">50</ix:nonFraction> million, then dividing the result by the number of shares of the Company&#8217;s common stock outstanding and dividing by $<ix:nonFraction contextRef="c536" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockDividendsPerShareCashPaid" scale="0" unitRef="usdPershares" id="ixv-36618">10.00</ix:nonFraction> per share.</span></td></tr> </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top"> <td style="width: 0.25in">&#160;</td> <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">3.</span></td> <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Each holder of the Company&#8217;s common stock received a pro rata portion of up to <ix:nonFraction contextRef="c543" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:CommonStockValue" scale="6" unitRef="usd" id="ixv-36619">1.2</ix:nonFraction> million Earnout Shares, <ix:nonFraction contextRef="c546" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SharebasedCompensationArrangementBySharebasedPaymentAwardAcceleratedVestingNumber" scale="0" unitRef="shares" id="ixv-36620">1,000,000</ix:nonFraction> of which are subject to vesting upon the achievement of certain stock price-based earnout targets and <ix:nonFraction contextRef="c536" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:SharebasedCompensationArrangementBySharebasedPaymentAwardOptionsVestedNumberOfShares" scale="0" unitRef="shares" id="ixv-36621">200,000</ix:nonFraction> of which are subject to vesting upon a change of control, respectively.</span></td></tr> </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top"> <td style="width: 0.25in">&#160;</td> <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">4.</span></td> <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Certain holders of the Company&#8217;s common stock received a pro rata portion of <ix:nonFraction contextRef="c536" decimals="0" format="ixt:num-dot-decimal" name="cero:EarnoutShares" scale="0" unitRef="shares" id="ixv-36622">875,000</ix:nonFraction> Earnout Shares, which became fully vested upon the closing of the Business Combination.</span></td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p></ix:continuation><div>
</div><div>


</div><!-- Field: Page; Sequence: 267; Value: 46 --><div>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CERo Therapeutics, Inc.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Notes to Financial Statements</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><ix:continuation id="_SubsequentEventsTextBlock-c40_cont_2"><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top"> <td style="width: 0.25in">&#160;</td> <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">5.</span></td> <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Certain holders of the Company&#8217;s common stock received a pro rata portion of up to <ix:nonFraction contextRef="c537" decimals="1" format="ixt:num-dot-decimal" name="us-gaap:CommonStockValue" scale="0" unitRef="usd" id="ixv-36623">1.0</ix:nonFraction> million Earnout Shares, which are subject to vesting upon the Company&#8217;s filing an investigational new drug application with the FDA.</span></td></tr> </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top"> <td style="width: 0.25in">&#160;</td> <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">7.</span></td> <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Each warrant to purchase the Company&#8217;s convertible preferred stock was converted into a warrant to acquire a number of shares of Class A common stock obtained by dividing the warrant as-if-exercised liquidation preference by $<ix:nonFraction contextRef="c537" decimals="2" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockLiquidationPreference" scale="0" unitRef="usdPershares" id="ixv-36624">10.00</ix:nonFraction>, with the exercise price equal to the total Company warrant exercise amount divided by the number of shares of Class A common stock issuable upon exercise.</span></td></tr> </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top"> <td style="width: 0.25in">&#160;</td> <td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">8.</span></td> <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The Company&#8217;s convertible notes automatically converted into shares of New CERo Series A Preferred Stock, at a conversion price equal to $<ix:nonFraction contextRef="c536" decimals="0" format="ixt:num-dot-decimal" name="us-gaap:PreferredStockConversionsInducements" scale="0" unitRef="usd" id="ixv-36625">1,000</ix:nonFraction> per share.</span></td></tr> </table>
<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>PIPE Financing</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>&#160;</b></p>

<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In February 2024, New CERo consummated a private
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to the Amended and Restated Securities Purchase Agreement, dated February 14, 2024, by and among the Company, PBAX and certain accredited
investors (the &#8220;Initial Investors&#8221;) for aggregate cash proceeds to New CERo of approximately $<ix:nonFraction contextRef="c317" decimals="-5" format="ixt:num-dot-decimal" name="us-gaap:ProceedsFromSalesOfAssetsInvestingActivities" scale="6" unitRef="usd" id="ixv-36630">10.0</ix:nonFraction> million. On April 1, 2024,
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to close on or around April 1, 2024. A portion of such Series A Preferred Stock was issued as consideration for the cancellation of outstanding
indebtedness or securities of the Company, including a promissory note of PBAX and the Company&#8217;s convertible notes. Such transactions
collectively are referred to as the &#8220;PIPE Financing.&#8221;</p></ix:continuation><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>


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    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="text-align: center; margin-top: 0pt; margin-bottom: 0pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->68<!-- Field: /Sequence --></span></p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Up to [_________] Shares of Common Stock</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Pre-Funded Warrants to Purchase up to [___]
Shares of Common Stock</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Common Warrants to Purchase up to [___] Shares
of Common Stock</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>Up to [___] Shares of Common Stock Issuable
Upon Exercise of Pre-Funded Warrants and Common Warrants</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img alt="" src="image_018.jpg"/></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>CERO THERAPEUTICS HOLDINGS, INC.</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PROSPECTUS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: 0.5in"><b>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;,
2024</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&#160;</p><div>


</div><!-- Field: Page; Sequence: 269 --><div>
    </div><div style="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1.5pt solid"><p style="margin: 0pt">&#160;</p></div><div>
    </div><div style="break-before: page; margin-top: 6pt; margin-bottom: 12pt"><p style="margin: 0pt">&#160;</p></div><div>
    </div><!-- Field: /Page --><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>PART II</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>INFORMATION NOT REQUIRED IN PROSPECTUS</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-indent: -1in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 13</b>. <b>Other Expenses of Issuance and Distribution</b>.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">The following table sets forth the estimated expenses
to be borne by the registrant in connection with the securities being registered hereby.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: bottom">
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    <td style="border-bottom: black 4.5pt double; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">*</span></td>
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">&#160;</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0in"/><td style="width: 0.25in; text-align: left">*</td><td style="text-align: justify">These fees are calculated based on the securities offered and
the number of issuances and accordingly cannot be defined at this time.</td>
</tr></table><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 14</b>. <b>Indemnification of Directors and Officers</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Section 145(a) of the DGCL
provides, in general, that a corporation may indemnify any person who was or is a party to or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation), because he or she is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys&#8217; fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by the person in connection with such action, suit or proceeding, if he or she acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his or her conduct was unlawful.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Section 145(b) of the DGCL
provides, in general, that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor because the person is or
was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys&#8217;
fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if he or she
acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, except
that no indemnification shall be made with respect to any claim, issue or matter as to which he or she shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of Chancery or other adjudicating court determines that, despite
the adjudication of liability but in view of all of the circumstances of the case, he or she is fairly and reasonably entitled to indemnity
for such expenses that the Court of Chancery or other adjudicating court shall deem proper.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Section 145 of the DGCL further
provides that to the extent a director or officer of a corporation has been successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to in Section 145(a) or (b) of the DGCL, or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys&#8217; fees) actually and reasonably incurred by such person in connection
therewith; that indemnification provided for by Section 145 of the DGCL shall not be deemed exclusive of any other rights to which the
indemnified party may be entitled; and the indemnification provided for by Section 145 of the DGCL shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit
of such person&#8217;s heirs, executors and administrators. Section 145(g) of the DGCL provides, in general, that a corporation may purchase
and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust
or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out
of his or her status as such, whether or not the corporation would have the power to indemnify the person against such liability under
Section 145 of the DGCL.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Section 102(b)(7) of the
DGCL provides that a corporation&#8217;s certificate of incorporation may contain a provision eliminating or limiting the personal liability
of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director; provided that such
provision shall not eliminate or limit the liability of a director (i) for any breach of the director&#8217;s duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the DGCL or (iv) for any transaction from which the director derived an improper personal benefit.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Additionally, our Charter
and Bylaws limit the liability of our (i) directors and (ii) officers, which includes each individual who has been duly appointed as an
officer of CERo and who, at the time of an act or omission as to which liability is asserted, is deemed to have consented to service of
process to our registered agent as contemplated by Section 3114(b) of Title 10 of the DGCL, in each case, to the fullest extent permitted
by the DGCL, and also provides that we indemnify our directors and officers to the fullest extent permitted by the DGCL.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In connection with the Closing,
we entered into indemnification agreements with each of our directors and executive officers. These agreements provide that we indemnify
each of our directors and officers to the fullest extent permitted by law and our Charter and Bylaws, and provides for advancement of
expenses incurred as a result of any proceeding against them as to which they could be indemnified.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">We also maintain a general
liability insurance policy, which covers certain liabilities of our directors and officers arising out of claims based on acts or omissions
in their capacities as directors or officers.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: -1in"><b>&#160;</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Item 15</b>. <b>Recent Sales of Unregistered
Securities</b>.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In February 2024, May 2024
and August 2024, we issued 119,050, 250,351 and 1,613,944 shares of Common Stock, respectively, to an investor as commitment shares in
consideration for entering into an&#160;equity&#160;line&#160;of credit with us. The issuance of these securities was made pursuant to
Section 4(a)(2) of the Securities Act, and the rules promulgated thereunder, to an accredited investor. As of the date of this prospectus,
we have issued an aggregate of 23,377,921 shares of Common Stock to such investor pursuant to the equity line of credit.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In February 2024, we issued
an aggregate of 10,039 shares of Series A Preferred Stock, at a price of $1,000 per share, initially convertible into 1,039,000 shares
of Common Stock at $10.00 per share, and 2,500 Preferred Warrants, resulting in aggregate gross proceeds to us of approximately $10.1
million. Such issuance includes 2,180 shares of Series A Preferred Stock, initially convertible into 2,180,000 shares of Common Stock,
that were issued to certain investors in exchange for consideration consisting of approximately $2.16 million aggregate outstanding principal
amount, together with accrued and unpaid interest thereon of approximately $0.02 million, of certain convertible promissory notes issued
in June 2023 by Legacy CERo and a promissory note issued in December 2022, as amended in December 2023, by PBAX. As additional consideration
to certain investors, we also issued 612,746 Series A Warrants as a structuring fee. In March 2024, with the consent of the applicable
investors, a portion of the shares of Series A Preferred Stock and Series A Warrants was cancelled and reissued to the purchasers of Series
B Preferred Stock described below.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In March 2024, we issued
an aggregate of 626 shares of Series B Preferred Stock, at a price of $1,000 per share, initially convertible into 62,600 shares of Common
Stock at $10.00 per share, resulting in aggregate gross proceeds to us of approximately $0.5 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In May 2024, we issued 345,566
shares of Common Stock to an investor as commitment shares in consideration for entering into an&#160;equity&#160;line&#160;of credit
with us. The issuance of these securities was made pursuant to Section 4(a)(2) of the Securities Act, and the rules promulgated thereunder,
to an accredited investor.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">In September 2024, we issued
an aggregate of 2,853 shares of Series C Preferred Stock, at a price of $1,000 per share, and 8,175,166 shares of Series C Warrants, resulting
in aggregate gross proceeds to us of approximately $1.25 million.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The issuance of these securities
was made pursuant to 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D, and the rules promulgated thereunder, to accredited
investors.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>&#160;</b>&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Item 16</b>. <b>Exhibits and Financial Statements Schedules</b>.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>(a) Exhibits.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>&#160;</i></b></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr>
    <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; width: 9%"><b>Exhibit<br/>
Number</b></td>
    <td style="vertical-align: top; width: 1%">&#160;</td>
    <td style="text-align: justify; border-bottom: black 1.5pt solid; vertical-align: bottom; width: 90%"><b>Description</b></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td>2.1</td>
    <td>&#160;</td>
    <td style="text-align: justify"><a href="http://www.sec.gov/Archives/edgar/data/1870404/000119312523160387/d494471dex21.htm">Business Combination Agreement, dated as of June 4, 2023, by and among Phoenix Biotech Acquisition Corp., PBCE Merger Sub, Inc. and CERo Therapeutics, Inc., as amended (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by Phoenix Biotech Acquisition Corp. with the Securities and Exchange Commission on June 5, 2023).</a></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td>2.2</td>
    <td>&#160;</td>
    <td style="text-align: justify"><a href="http://www.sec.gov/Archives/edgar/data/1870404/000121390024010227/ea192779ex2-1_phoenix.htm">Amendment No. 1 to the Business Combination Agreement, dated as of February 5, 2024, by and among Phoenix Biotech Acquisition Corp., PBCE Merger Sub, Inc. and CERo Therapeutics, Inc. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by Phoenix Biotech Acquisition Corp. with the Securities and Exchange Commission on February 6, 2024).</a></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td>2.3</td>
    <td>&#160;</td>
    <td style="text-align: justify"><a href="http://www.sec.gov/Archives/edgar/data/1870404/000121390024013804/ea193537ex2-1_phoenixbio.htm">Amendment No. 2 to the Business Combination Agreement, dated as of February 13, 2024, by and among Phoenix Biotech Acquisition Corp., PBCE Merger Sub, Inc. and CERo Therapeutics, Inc. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by Phoenix Biotech Acquisition Corp. with the Securities and Exchange Commission on February 13, 2024).</a></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td>3.1</td>
    <td>&#160;</td>
    <td style="text-align: justify"><a href="http://www.sec.gov/Archives/edgar/data/1870404/000121390024017157/ea193847ex3-1_cerothera.htm">Second Amended and Restated Certificate of Incorporation of CERo Therapeutics Holdings, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K/A filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on February 27, 2024).</a></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td>3.2</td>
    <td>&#160;</td>
    <td style="text-align: justify"><a href="http://www.sec.gov/Archives/edgar/data/1870404/000121390024017157/ea193847ex3-2_cerothera.htm">Second Amended and Restated Bylaws of CERo Therapeutics Holdings, Inc. (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K/A filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on February 27, 2024).</a></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td>3.3</td>
    <td>&#160;</td>
    <td style="text-align: justify"><a href="http://www.sec.gov/Archives/edgar/data/1870404/000121390024017157/ea193847ex3-3_cerothera.htm">Certificate of Designation of Preferences, Rights and Limitations of the Series A Convertible Preferred Stock (incorporated by reference to Exhibit 3.3 to the Current Report on Form 8-K/A filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on February 27, 2024).</a></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td>3.4</td>
    <td>&#160;</td>
    <td style="text-align: justify"><a href="http://www.sec.gov/Archives/edgar/data/1870404/000121390024017157/ea193847ex3-4_cerothera.htm">Certificate of Correction to Certificate of Designation of Preferences, Rights and Limitations of the Series A Convertible Preferred Stock (incorporated by reference to Exhibit 3.4 to the Current Report on Form 8-K/A filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on February 27, 2024).</a></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td>3.5</td>
    <td>&#160;</td>
    <td style="text-align: justify"><a href="http://www.sec.gov/Archives/edgar/data/1870404/000121390024017157/ea193847ex3-5_cerothera.htm">Second Certificate of Correction to Certificate of Designation of Preferences, Rights and Limitations of the Series A Convertible Preferred Stock (incorporated by reference to Exhibit 3.5 to the Current Report on Form 8-K/A filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on February 27, 2024).</a></td></tr>
  <tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td>3.6</td>
    <td>&#160;</td>
    <td style="text-align: justify"><a href="http://www.sec.gov/Archives/edgar/data/1870404/000121390024029051/ea020195501ex3-6_cerothera.htm">Certificate of Designation of Preferences, Rights and Limitations of the Series B Convertible Preferred Stock (incorporated by reference to Exhibit 3.6 to the Annual Report on Form 10-K filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on April 2, 2024).</a></td></tr>

<tr style="vertical-align: top; background-color: White">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
<tr style="vertical-align: top; background-color: rgb(204,238,255)">
    <td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">3.7</span></td>
    <td>&#160;</td>
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</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><p style="margin: 0"></p><div>

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</div><p style="margin: 0">&#160;</p><div>


</div><p style="margin: 0"></p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top; background-color: #CCEEFF">
    <td>4.1</td>
    <td>&#160;</td>
    <td style="text-align: justify"><a href="http://www.sec.gov/Archives/edgar/data/1870404/000119312521271453/d198272dex44.htm">Warrant Agreement, by and between Phoenix Biotech Acquisition Corp. and Continental Stock Transfer &amp; Trust Company, dated October 5, 2021 (incorporated by reference to Exhibit 4.4 to the Registration Statement on Form S-1 filed by Phoenix Biotech Acquisition Corp. with the Securities and Exchange Commission on September 13, 2021).</a></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: #CCEEFF">
    <td>4.2</td>
    <td>&#160;</td>
    <td style="text-align: justify"><a href="http://www.sec.gov/Archives/edgar/data/1870404/000121390024017157/ea193847ex4-2_cerothera.htm">Form of Common Warrant (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K/A filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on February 27, 2024).</a></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: #CCEEFF">
    <td>4.3</td>
    <td>&#160;</td>
    <td style="text-align: justify"><a href="http://www.sec.gov/Archives/edgar/data/1870404/000121390024017157/ea193847ex4-3_cerothera.htm">Form of Preferred Warrant (incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K/A filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on February 27, 2024).</a></td></tr>
  <tr style="vertical-align: top">
    <td>&#160;</td>
    <td>&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
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    <td style="text-align: justify">&#160;</td>
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    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
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    <td style="text-align: justify">&#160;</td>
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    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
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  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
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    Labels Linkbase Document.</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Inline XBRL Taxonomy Extension
    Presentation Linkbase Document.</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: #CCEEFF">
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    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Cover Page Interactive
    Data File (formatted as Inline XBRL and contained in Exhibit 101).</span></td></tr>
  <tr style="vertical-align: top">
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify">&#160;</td></tr>
  <tr style="vertical-align: top; background-color: #CCEEFF">
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    <td style="text-align: justify">&#160;</td>
    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><a href="ea022538801ex-fee_cero.htm">Filing Fee Table.</a></span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
  <tr style="vertical-align: top">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in"></p><div>

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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>(b) Financial Statement Schedules.</i></b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">See the index to the consolidated
financial statements included on page F-1 for a list of the financial statements included in this registration statement. Schedules not
listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: -1in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 1in; text-align: justify; text-indent: -1in"><b>Item&#8201;17</b>.
<b>Undertakings</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">The undersigned registrant
hereby undertakes:</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

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    <td style="width: 0.25in">&#160;</td>
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="width: 0.5in">&#160;</td>
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">To include any prospectus required by section 10(a)(3) of the Securities Act;</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="width: 0.5in">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="width: 0.5in">&#160;</td>
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    <td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;</span></td></tr>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="width: 0.25in">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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    <td style="width: 0.5in">&#160;</td>
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.75in; text-align: justify; text-indent: -0.25in">&#160;</p><div>

</div><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant
to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of
the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>


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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>SIGNATURES</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Pursuant to the requirements
of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the
undersigned, duly authorized, in the city of South San Francisco, State of California, on the 20th day of December, 2024.</p><div>
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</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

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</div><div><a id="a_030"></a></div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><b>POWER OF ATTORNEY</b></p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">KNOW ALL PERSONS BY THESE
PRESENTS, that each person whose signature appears below constitutes and appoints each of Chris Ehrlich and Andrew Kucharchuk as his or
her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name,
place and stead, in any and all capacities, to sign one or more registration statements on Form S-1 and any and all amendments to such
registration statements, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the United
States Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">&#160;</p><div>

</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.25in">Pursuant to the requirements
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</div><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.25in">&#160;</p><div>

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{"company-data": {"conformed-name": "CERO THERAPEUTICS HOLDINGS, INC.", "cik": "0001870404", "assigned-sic": "2836", "organization-name": "03 Life Sciences", "irs-number": "871088814", "state-of-incorporation": "DE", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-284007", "film-number": "241569784"}, "business-address": {"street1": "201 HASKINS WAY", "street2": "SUITE 230", "city": "SOUTH SAN FRANCISCO", "state": "CA", "zip": "94080", "phone": "650-407-2376"}, "mail-address": {"street1": "201 HASKINS WAY", "street2": "SUITE 230", "city": "SOUTH SAN FRANCISCO", "state": "CA", "zip": "94080"}, "former-company": {"former-conformed-name": "PHOENIX BIOTECH ACQUISITION CORP.", "date-changed": "20210630"}}
As filed with the Securities and Exchange Commission
on December 20, 2024
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CERO THERAPEUTICS HOLDINGS, INC.
(Exact name of registrant as specified in its
charter)
Delaware
2836
81-4182129
(State or other jurisdiction of
incorporation or organization)
(Primary Standard Industrial
Classification Code Number)
(I.R.S. Employer
Identification No.)
201 Haskins Way, Suite 230
South San Francisco, CA 94080
(215) 731-9450
(Address, including zip code, and telephone
number, including area code, of registrant's principal executive offices)
Chris Ehrlich
Chief Executive Officer
CERo Therapeutics Holdings, Inc.
201 Haskins Way, Suite 230
South San Francisco, CA 94080
Telephone: (215) 731-9450
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Copies to:
Stephen M. Davis
Jeffrey A. Letalien
Goodwin Procter LLP
620 Eighth Avenue
New York, NY 10018
(212) 813-8800
Barry I. Grossman, Esq.
Matthew Bernstein, Esq.
Justin Grossman, Esq.
Ellenoff Grossman & Schole LLP
1345 Avenue of the Americas, 11th Floor
New York, NY 10105
Approximate date of commencement of proposed
sale to the public
: From time to time after this Registration Statement becomes effective.
If any of the securities being registered on this
Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box:
☒
If this Form is filed to register additional securities
for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement
number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed
pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed
pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of
the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company.
See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company,"
and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☒
Smaller reporting company
☒
Emerging growth company
☒
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.
☐
The registrant (the "Registrant")
hereby amends this registration statement (this "Registration Statement") on such date or dates as may be necessary to delay
its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in
this preliminary prospectus is not complete and may be changed. These securities may not be issued until the registration statement filed
with the U.S. Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and
does not constitute the solicitation of an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
SUBJECT TO COMPLETION,
DATED DECEMBER 20, 2024
PRELIMINARY PROSPECTUS
CERO THERAPEUTICS HOLDINGS, INC.
Up to [___] Shares of Common Stock
Pre-Funded Warrants to Purchase up to [___]
Shares of Common Stock
Common Warrants to Purchase up to [___] Shares
of Common Stock
Up to [___] Shares of Common Stock Issuable
Upon Exercise of Pre-Funded Warrants and Common Warrants
We are offering up to [________]
shares of our common stock, par value $0.0001 per share ("Common Stock"), together with new common warrants (the "Offered
Common Warrants") to purchase up to an aggregate of [___] shares of our Common Stock and an aggregate of [___] shares of our Common
Stock issuable upon exercise of the Offered Common Warrants. Each share of Common Stock, or pre-funded warrant in lieu thereof ("Pre-Funded
Warrants"), is being sold together with an Offered Common Warrant to purchase [___] share of Common Stock. Each Common Offered Warrant
will have an exercise price of $[___], will be immediately exercisable and will expire on the fifth anniversary of the original issuance
date.
We are also offering to certain
purchasers whose purchase of shares of Common Stock in this offering would otherwise result in the purchaser, together with its affiliates
and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding Common
Stock immediately following the consummation of this offering, the opportunity to purchase, if any such purchaser so chooses, Pre-Funded
Warrants to purchase up to [___] shares of Common Stock, in lieu of shares of Common Stock that would otherwise result in such purchaser's
beneficial ownership exceeding 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding Common Stock. The public offering
price of each Pre-Funded Warrant and accompanying Offered Common Warrant will be equal to the price at which one share of Common Stock
and accompanying Offered Common Warrant is sold to the public in this offering, minus $0.001, and the exercise price of each pre-funded
warrant will be $0.001 per share. The Pre-Funded Warrants will be immediately exercisable and may be exercised at any time until all of
the Pre-Funded Warrants are exercised in full.
The shares of Common Stock,
or Pre-Funded Warrants in lieu thereof, and the accompanying Offered Common Warrants can only be purchased together in this offering but
will be issued separately and will be immediately separable upon issuance.
This offering will terminate
on [___], 2024, unless we decide to terminate the offering (which we may do at any time in our discretion) prior to that date. We will
have one closing for all the securities purchased in this offering.
As of December 16, 2024,
there were 333,580,498 shares of Common Stock outstanding on a fully-diluted basis after giving effect to the conversion of all outstanding
shares of our Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock (each as defined below) and the exercise
of all outstanding Warrants (as defined below) and options, of which [___] shares were held by non-affiliates (without taking into account
beneficial ownership or stock exchange limitations). If all of the [___] shares of Common Stock offered under this prospectus, including
the [___] shares of Common Stock issuable upon exercise of the Pre-Funded Warrants and Offered Common Warrants, were issued and outstanding
as of December [__], 2024 (without taking into account beneficial ownership or stock exchange limitations), such shares would represent
approximately [__]% of the total number of our fully-diluted shares of Common Stock outstanding and approximately [__]% of the total number
of our fully-diluted shares of Common Stock held by non-affiliates.
You should read this prospectus
and any prospectus supplement or amendment carefully before you invest in our securities.
Our Common Stock is listed
on Nasdaq under the symbol "CERO." On December 18, 2024, the last quoted sale price for the shares of our Common Stock as
reported on the Nasdaq was $0.06 per share.
Our existing public warrants
(the "Public Warrants") are listed on Nasdaq under the symbol "CEROW," and the last reported sale price of the
Public Warrants on Nasdaq on December 18, 2024 was $0.009 per Public Warrant. The Offered Common Warrants do not have the same terms and
conditions as our Public Warrants. The actual number of securities, and the combined offering price per share of Common Stock and the
accompanying Offered Common Warrants, and the exercise price for the accompanying Offered Common Warrants will be as determined between
us and investors at the time of pricing, and may be at a discount to the current market price of our Common Stock and the Public Warrants.
Therefore, the recent market prices used throughout this prospectus may not be indicative of the actual public offering price of the shares
of Common Stock and accompanying Offered Common Warrants. Currently, there is no public market for the Offered Common Warrants.
We are an "emerging
growth company" under applicable federal securities laws and are subject to reduced public company reporting requirements.
We have engaged
JonesTrading Institutional Services LLC ("Jones" or the "placement agent") to act as our exclusive placement agent
in connection with this offering. The placement agent has agreed to use its reasonable best efforts to arrange for the sale of the
securities offered by this prospectus. The placement agent is not purchasing or selling any of the securities we are offering and
the placement agent is not required to arrange the purchase or sale of any specific number of securities or dollar amount. We have
agreed to pay to the placement agent the placement agent fees set forth in the table below, which assumes that we sell all of the
securities offered by this prospectus. Since we will deliver the securities to be issued in this offering upon our receipt of
investor funds, there is no arrangement for funds to be received in escrow, trust or similar arrangement.
There is no minimum offering
requirement as a condition of closing of this offering. Because there is no minimum offering amount required as a condition to closing
this offering, we may sell fewer than all of the securities offered hereby, which may significantly reduce the amount of proceeds received
by us, and investors in this offering will not receive a refund in the event that we do not sell an amount of securities sufficient to
pursue our business goals described in this prospectus. In addition, because there is no escrow account and no minimum offering amount,
investors could be in a position where they have invested in our company, but we are unable to fulfill all of our contemplated objectives
due to a lack of interest in this offering.
Further, any proceeds from
the sale of securities offered by us will be available for our immediate use, despite uncertainty about whether we would be able to use
such funds to effectively implement our business plan. We will bear all costs associated with the offering. See "Plan of Distribution"
on page 183 of this prospectus for more information regarding these arrangements.
Per Share
and Offered
Common
Warrant
Per
Pre-Funded
Warrant and
Offered
Common
Warrant
Total
Public offering price
$
$
$
Placement agent fees
$
$
$
Proceeds, before expenses, to us
$
$
$
Delivery of the shares of
Common Stock, Pre-Funded Warrants and Offered Common Warrants offered hereby is expected to be made on or about [__], 2024, subject to
the satisfaction of customary closing conditions.
Investing in our
securities involves a high degree of risk. Before buying any securities, you should carefully read the discussion of the risks of investing
in our securities in "Risk Factors" beginning on page 9 of this prospectus.
Neither the Securities
and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued under this prospectus
or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
Jones
The date of this
prospectus is             , 2024.
TABLE OF CONTENTS
p
age
ABOUT THIS PROSPECTUS
ii
MARKET AND INDUSTRY INFORMATION
iii
TRADEMARKS
iv
SELECTED DEFINITIONS
v
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
x
PROSPECTUS SUMMARY
1
THE OFFERING
7
RISK FACTORS
9
USE OF PROCEEDS
69
DETERMINATION OF OFFERING
    PRICE
MARKET PRICE AND DIVIDEND INFORMATION
70
CAPITALIZATION
71
DILUTION
72
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
74
BUSINESS
84
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF PBAX
123
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF CERO
129
MANAGEMENT OF CERO
142
EXECUTIVE COMPENSATION
152
DIRECTOR COMPENSATION
158
PRINCIPAL STOCKHOLDERS
159
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
162
DESCRIPTION OF SECURITIES
164
DESCRIPTION OF SECURITIES WE ARE OFFERING
178
SECURITIES ACT RESTRICTIONS ON RESALE OF OUR SECURITIES
182
PLAN OF DISTRIBUTION
183
LEGAL MATTERS
186
EXPERTS
186
WHERE YOU CAN FIND MORE INFORMATION
186
INDEX TO FINANCIAL STATEMENTS
F-1
i
ABOUT THIS PROSPECTUS
You should rely only on the
information contained in this prospectus, any amendment or supplement to this prospectus, and any related free writing prospectus prepared
by or on behalf of us or to which we have referred you. Neither we nor the placement agent have authorized anyone to provide you with
information that is different from, or in addition to, that contained in this prospectus, any amendment or supplement to this prospectus
and any related free writing prospectus prepared by or on behalf of us or to which we have referred you.
Neither we nor the placement
agent take responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you.
Neither we nor the placement agent will make an offer to sell these securities in any jurisdiction where such offer or sale is not permitted.
No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus,
any applicable prospectus supplement or any related free writing prospectus. You should assume that the information appearing in this
prospectus or any prospectus supplement is accurate as of the date on the front of those documents only, regardless of the time of delivery
of this prospectus or any applicable prospectus supplement, or any sale of a security. Our business, financial condition, results of operations
and prospects may have changed since those dates.
Neither we nor the placement
agent have taken any action that would permit this offering, or possession or distribution of this prospectus, in any jurisdiction where
action for that purpose is required, other than in the United States. Persons who have come into possession of this prospectus in a jurisdiction
outside the United States are required to inform themselves about and to observe any restrictions relating to this offering and the distribution
of this prospectus applicable to that jurisdiction.
We may also provide a prospectus
supplement or post-effective amendment to the registration statement to add information to, or update or change information contained
in, this prospectus. Any statement contained in this prospectus will be deemed to be modified or superseded for purposes of this prospectus
to the extent that a statement contained in such prospectus supplement or post-effective amendment modifies or supersedes such statement.
Any statement so modified will be deemed to constitute a part of this prospectus only as so modified, and any statement so superseded
will be deemed not to constitute a part of this prospectus. You should read both this prospectus and any applicable prospectus supplement
or post-effective amendment to the registration statement together with the additional information to which we refer you in the sections
of this prospectus titled "
Where You Can Find More Information
."
This prospectus contains
summaries of certain provisions contained in some of the documents described herein, but reference is made to the actual documents for
complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some of the documents referred
to herein have been filed or will be filed as exhibits to the registration statement of which this prospectus is a part (the "Current
Registration Statement"), and you may obtain copies of those documents as described below under "
Where You Can Find More
Information
."
Certain monetary amounts,
percentages and other figures included herein have been subject to rounding adjustments. Accordingly, figures shown as totals in certain
tables and charts may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the
text may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages that precede them.
Unless the context otherwise
requires, all references herein to "CERo," "we," "us," or "our" refer to the business
and operations of Legacy CERo and its consolidated subsidiaries prior to consummation of the Business Combination and to CERo and its
consolidated subsidiaries following the consummation of the Business Combination. "Legacy CERo" refers to CERo Therapeutics,
Inc. prior to the consummation of the Business Combination.
ii
MARKET AND INDUSTRY INFORMATION
Certain information contained
in this document relates to or is based on studies, publications, surveys and other data obtained from third-party sources and our own
internal estimates and research. We believe these third-party sources to be reliable as of the date of this prospectus and we are responsible
for such information. Such information and data involves risks and uncertainties and is subject to change based on various factors, including,
potentially, those discussed under the section of this prospectus entitled "
Risk Factors
." Furthermore, such information
and data cannot always be verified with complete certainty due to limits on the availability and reliability of raw data, the voluntary
nature of the data gathering process and other limitations and uncertainties inherent in any statistical survey. Additionally, while our
own internal research has not been verified by any independent source, we believe such research to be reliable and are responsible for
any information disclosed in this prospectus based upon such internal research.
iii
TRADEMARKS
This document contains references
to trademarks and service marks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus
may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that the applicable licensor
will not assert, to the fullest extent under applicable law, its rights to these trademarks and trade names. We do not intend our use
or display of other companies' trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship
of us by, any other companies.
iv
SELECTED DEFINITIONS
As used in this prospectus,
unless otherwise noted or the context otherwise requires, references to the following capitalized terms have the meanings set forth below:
"
Arena
"
refers to Arena Business Solutions Global SPC II, Ltd. on behalf of and for the account of Segregated Portfolio #13 – SPC #13.
"
Arena Commitment
Shares
" refer to up to 1,000,000 shares of Common Stock issued to Arena as consideration for executing and delivering the Arena
Purchase Agreement.
"
Arena Equity Financing
"
refers to the equity line of credit established by the Arena Purchase Agreement.
"
Arena Purchase
Agreement
" refers to the Purchase Agreement, dated as of February 23, 2024, by and between CERo and Arena.
"
Board
"
refers to the board of directors of CERo.
"
Business Combination
"
refers to the transactions contemplated by the Business Combination Agreement, including the merger between Merger Sub and Legacy CERo.
"
Business Combination
Agreement
" refers to the Business Combination Agreement, dated as of June 4, 2023, as amended by Amendment No. 1, dated February
5, 2024 and Amendment No. 2, dated February 13, 2024, by and between PBAX, Merger Sub and Legacy CERo.
"
Bylaws
"
refers to the Amended and Restated Bylaws of CERo.
"
Charter
"
refers to CERo's Second Amended and Restated Certificate of Incorporation, as filed with the Secretary of the State of Delaware
February 14, 2024.
"
Class A Common
Stock
" refers to the PBAX Class A common stock, par value $0.0001 per share.
"
Closing
"
refers to the closing of the Business Combination.
"
Commitment Shares
"
refers to the Arena Commitment Shares and the Keystone Commitment Shares.
"
Common Stock
"
refers to the common stock, par value $0.0001 per share, of CERo.
"
Common Warrants
"
refers to the Public Warrants, Private Placement Warrants, the Conversion Warrants, the Series A Warrants and the Series C Warrants.
"
Conversion Warrants
"
refer to the warrants initially issued by CERo Therapeutics, Inc. and converted into warrants to purchase Common Stock in connection with
the Business Combination.
"
Convertible Bridge
Notes
" refer to the senior secured convertible notes issued by Legacy CERo to certain Legacy CERo Stockholders, which automatically
converted into shares of Common Stock upon Closing.
"
Danforth
"
refers to Danforth Advisors, LLC.
"
DGCL
"
refers to the Delaware General Corporation Law, as may be amended from time to time.
"
dollars
"
or "
$
" refers to U.S. dollars.
"
Earnout Shares
"
refer to the Primary Earnout Shares, the Secondary Earnout Shares and the Tertiary Earnout Shares, collectively.
v
"
Exchange Act
"
refers to the Securities Exchange Act of 1934, as amended.
"
FDA
"
refers to the U.S. Food and Drug Administration, or any successor agency thereto.
"
Fee Modification
Agreements
" refers to the fee modification agreements between PBAX and certain third-party vendors and service providers, pursuant
to which such vendors received shares of Common Stock in lieu of certain payments due to such vendors prior to Closing.
"
First PIPE Financing
"
refers to the private placement pursuant to which we issued and sold, and the PIPE Investors purchased, shares of Series A Preferred Stock,
the Series A Warrants and Preferred Warrants, on the terms and conditions set forth in the First Securities Purchase Agreement.
"
First PIPE Registration
Rights Agreement
" refers to the Registration Rights Agreement, dated as of February 14, 2024, by and between CERo and certain
PIPE Investors.
"
First Securities
Purchase Agreement
" refers to the Amended and Restated Securities Purchase Agreement, dated as of February 14, 2024, by and
among PBAX, Legacy CERo and certain PIPE Investors, pursuant to which CERo agreed to issue and sell 10,039 shares of Series A Preferred
Stock, 612,746 Series A Warrants and 2,500 Preferred Warrants.
"
Initial Public
Offering
" refers to the initial public offering of PBAX, which closed on October 8, 2021.
"
Investor Rights
Agreement
" refers to the Investor Rights and Lock-up Agreement, dated February 14, 2024, by and among CERo, the Sponsor, certain
Legacy CERo Stockholders and certain other parties.
"
Keystone
"
refers to Keystone Capital Partners, LLC.
"
Keystone Commencement
Date
" refers to the time when all of the conditions to our right to commence sales of Common Stock to Keystone set forth in
the respective Keystone Purchase Agreements have been satisfied.
"
Keystone Commitment
Amount
" refers to the $25,000,000 of shares of Common Stock that Keystone has committed to purchase pursuant to the Keystone
Purchase Agreements.
"
Keystone Commitment
Shares
" refers to the 1,983,345 shares of Common Stock that have been issued to Keystone as consideration for Keystone entering
into the Keystone Purchase Agreements.
"
Keystone Equity
Financing
" refers to the equity line of credit established by the Keystone Purchase Agreements.
"
Keystone Purchase
Agreements
" refers to the Old Keystone Purchase Agreement and the New Keystone Purchase Agreement.
"
Keystone
Purchase Shares
" refers to the shares of Common Stock that CERo may elect to issue and sell to Keystone after the Keystone Commencement
Date.
"
Keystone Registration
Rights Agreements
" refers to the Old Registration Rights Agreement and the New Registration Rights Agreement.
"
Legacy CERo
"
refers to CERo Therapeutics, Inc.
"
Legacy CERo common stock
"
refers to the common stock, par value $0.0001 per share, of Legacy CERo.
"
Legacy CERo preferred stock
"
refers to the preferred stock, par value $0.0001 per share, of Legacy CERo.
vi
"
Legacy CERo options
"
refers to the options to purchase shares of Legacy CERo common stock.
"
Legacy CERo Stockholders
"
refers to the holders of Legacy CERo common stock and/or Legacy CERo preferred stock prior to the Business Combination.
"
Legacy CERo warrants
"
refers to the warrants to purchase shares of Legacy CERo preferred stock.
"
Liquidated Damages
Modification Agreement
" refers to the Liquidated Damages Modification Agreement, dated as of February 23, 2024, by and between
us and Danforth.
"
Merger Sub
"
refers to PBCE Merger Sub, Inc., a Delaware corporation.
"
Nasdaq
"
refers to the Nasdaq Stock Market LLC.
"
New Keystone Registration
Rights Agreement
" refers to the Registration Rights Agreement, dated as of November 8, 2024, by and between CERo and Keystone.
"
New Keystone Purchase
Agreement
" refers to the Common Stock Purchase Agreement, dated as of November 8, 2024, by and between CERo and Keystone.
"
Old Keystone Purchase
Agreement
" refers to the Common Stock Purchase Agreement, dated as of February 14, 2024, by and between PBAX and Keystone.
"
Old Keystone Registration
Rights Agreement
" refers to the Registration Rights Agreement, dated as of February 14, 2024, by and between CERo and Keystone.
"
PBAX"
refers
to Phoenix Biotech Acquisition Corp., a Delaware corporation.
"
PBAX Class A Common
Stock
" refers to the Class A common stock, par value $0.0001 per share, of PBAX.
"
PIPE Financings
"
refers to the First PIPE Financing, the Second PIPE Financing and the Third PIPE Financing.
"
PIPE Investors
"
refer to the investors in the PIPE Financings.
"
PIPE Registration
Rights Agreement
" refers to the First PIPE Registration Rights Agreement, the Second PIPE Registration Rights Agreement and
the Third PIPE Registration Rights Agreement.
"
PIPE Warrants
"
refer to the Series A Warrants, the Series C Warrants and the Preferred Warrants issued in the PIPE Financings.
"
Preferred Stock
"
refers to the shares of preferred stock, par value $0.0001 per share, of CERo.
"Preferred Shares
"
refer to the shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock issued in the PIPE Financings,
including the Warrant Preferred Shares.
"
Preferred Warrants
"
refer to warrants to purchase shares of Series A Preferred Stock.
"
Primary Earnout
Shares
" refer to the 1,200,000 shares of Common Stock issued to the holders of Legacy CERo common stock and Legacy CERo preferred
stock in connection with the Business Combination, 1,000,000 of which are subject to vesting upon the achievement of certain stock price-based
earnout targets and 200,000 of which are subject to vesting upon a change of control, respectively.
vii
"
Private Placement
Warrants
" refer to private placement warrants to purchase shares of Common Stock, at an exercise price of $11.50 per share,
that were originally sold in a private placement concurrently with the Initial Public Offering.
"
Public Warrants
"
refer to the warrants to purchase shares of Common Stock, at an exercise price of $11.50 per share, that were originally issued in the
Initial Public Offering.
"
Rollover Warrants
"
refer to warrants to purchase shares of Common Stock, at an exercise price of $10.00 per share, that were converted from Legacy CERo warrants
in connection with the Business Combination.
"
SEC
"
refers to the U.S. Securities and Exchange Commission.
"
Secondary Earnout
Shares
" refer to the 875,000 shares of Common Stock issued to the holders of Legacy CERo common stock and Legacy CERo preferred
stock in connection with the Business Combination, which became fully vested at Closing.
"
Second PIPE Financing
"
refers to the private placement pursuant to which we issued and sold, and the PIPE Investors purchased, shares of Series B Preferred Stock,
on the terms and conditions set forth in the Second Securities Purchase Agreement.
"
Second PIPE Registration
Rights Agreement
" refers to the Registration Rights Agreement, dated as of March 29, 2024, by and between CERo and certain PIPE
Investors.
"Second Securities
Purchase Agreement
" refers to the Securities Purchase Agreement, dated as of March 29, 2024, by and among CERo and certain PIPE
Investors, pursuant to which CERo agreed to issue and sell 626 shares of Series B Preferred Stock.
"
Securities Act
"
refers to the Securities Act of 1933, as amended.
"
Securities Purchase
Agreements
" refers to the First Securities Purchase Agreement, the Second Securities Purchase Agreement and the Third Securities
Purchase Agreement.
"
Series A Certificate
of Designations
" refers to the Certificate of Designations of Rights and Preferences of the Series A Preferred Stock, as amended
from time to time.
"
Series A Preferred
Stock
" refers to the Series A convertible preferred stock, $0.0001 par value per share, of CERo.
"
Series A Warrants
"
refers to warrants to purchase Common Stock, at a current exercise price of $1.39 per share, sold to certain PIPE Investors pursuant to
the First Securities Purchase Agreement.
"
Series B Certificate
of Designations
" refers to the Certificate of Designations of Rights and Preferences of the Series B Preferred Stock, as amended
from time to time.
"
Series B Preferred
Stock
" refers to the Series B convertible preferred stock, $0.0001 par value per share, of CERo.
"
Series C
Certificate of Designations
" refers to the Certificate of Designations of Rights and Preferences of the Series C Preferred Stock,
as amended from time to time.
viii
"
Series C Preferred
Stock
" refers to the Series C convertible preferred stock, $0.0001 par value per share, of CERo.
"
Series C Warrants
"
refers to warrants to purchase shares of Common Stock, at a current exercise price of $0.098 per share, sold to certain PIPE Investors
pursuant to the Third Securities Purchase Agreement.
"
Sponsor
"
refers to Phoenix Biotech Sponsor, LLC, a Delaware limited liability company.
"
Tertiary Earnout
Shares
" refer to the 1,000,000 shares of Common Stock issued to the holders of Legacy CERo common stock and Legacy CERo preferred
stock in connection with the Business Combination, which will be fully vested upon the achievement of certain regulatory milestone-based
earnout targets.
"
Third PIPE Financing
"
refers to the private placement pursuant to which we issued and sold, and the PIPE Investors purchased, shares of Series C Preferred Stock,
on the terms and conditions set forth in the Third Securities Purchase Agreement.
"
Third PIPE Registration
Rights Agreement
" refers to the Registration Rights Agreement, dated as of September 26, 2024, by and between CERo and certain
PIPE Investors.
"
Third
Securities Purchase Agreement
" refers to the Securities Purchase Agreement, dated as of September 25, 2024, by and among
CERo and certain PIPE Investors, pursuant to which CERo agreed to issue and sell 2,853 shares of Series C Preferred Stock and
warrants to purchase 8,175,166 shares of Common Stock (the "Series C Warrants").
"
Warrant Common
Shares
" refer to the shares of Common Stock underlying the Common Warrants.
"
Warrant Preferred
Shares
" refer to the shares of Preferred Stock underlying the Preferred Warrants
"
Warrants
"
refer to the Rollover Warrants, the Private Placement Warrants, the Common Warrants, the Preferred Warrants and the Public Warrants.
ix
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains
forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act. All
statements other than statements of historical facts contained in this prospectus, including statements regarding our future results of
operations and financial position, business strategy, drug candidates, planned preclinical studies and clinical trials, results of preclinical
studies, clinical trials, research and development ("R&D") costs, regulatory approvals, timing and likelihood of success,
as well as plans and objectives of management for future operations, are forward-looking statements. These statements involve known and
unknown risks, uncertainties and other important factors that are in some cases beyond our control and may cause our actual results, performance
or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking
statements.
In some cases, you can identify
forward-looking statements by terms such as "may," "will," "should," "would," "expect,"
"plan," "anticipate," "could," "intend," "target," "project,"
"believe," "estimate," "predict," "potential," or "continue" or the negative
of these terms or other similar expressions. Forward-looking statements contained in this prospectus include, but are not limited to,
statements about:
●
our financial performance;
●
our ability to obtain additional cash and the sufficiency of our existing cash, cash equivalents and marketable securities to fund our future operating expenses and capital expenditure requirements, including the development and, if approved, commercialization of our product candidates;
●
our ability to realize the benefits expected from the Business Combination pursuant to the Business Combination Agreement;
●
successfully defend litigation that may be instituted against us in connection with the Business Combination;
●
the accuracy of our estimates regarding expenses, future revenue, capital requirements, and needs for additional financing;
●
the scope, progress, results and costs of developing CER-1236 or any other product candidates we may develop, and conducting preclinical studies and clinical trials;
●
the timing and costs involved in obtaining and maintaining regulatory approval of CER-1236 or any other product candidates we may develop, and the timing or likelihood of regulatory filings and approvals, including our expectation to seek special designations or accelerated approvals for our drug candidates for various indications;
●
current and future agreements with third parties in connection with the development and commercialization of CER-1236 or any other future product candidate;
●
our ability to advance product candidates into and successfully complete clinical trials;
●
the ability of our clinical trials to demonstrate the safety and efficacy of CER-1236 and any other product candidates we may develop, and other positive results;
●
the size and growth potential of the markets for our product candidates, and our ability to serve those markets;
●
the rate and degree of market acceptance of our product candidates;
●
our plans relating to commercializing CER-1236 and any other product candidates we may develop, if approved, including the geographic areas of focus and our ability to grow a sales team;
●
the success of competing drugs, therapies or other products that are or may become available;
x
●
developments relating to our competitors and our industry, including competing product candidates and therapies;
●
our plans relating to the further development and manufacturing of CER-1236 and any other product candidates we may develop, including additional indications that we may pursue for CER-1236 or other product candidates;
●
existing regulations and regulatory developments in the United States and other jurisdictions;
●
our potential and ability to successfully manufacture and supply CER-1236 and any other product candidates we may develop for clinical trials and for commercial use, if approved;
●
the rate and degree of market acceptance of CER-1236 and any other product candidates we may develop, as well as the pricing and reimbursement of CER-1236 and any other product candidates we may develop, if approved;
●
our expectations regarding our ability to obtain, maintain, protect and enforce intellectual property protection for CER-1236 and for any other product candidate;
●
our ability to operate our business without infringing, misappropriating or otherwise violating the intellectual property rights of third parties;
●
our ability to realize the anticipated benefits of any strategic transactions;
●
our ability to attract and retain the continued service of our key personnel and to identify, hire, and then retain additional qualified personnel and our ability to attract additional collaborators with development, regulatory and commercialization expertise;
●
our ability to maintain proper and effective internal controls;
●
the ability to obtain or maintain the listing of our Common Stock, and our Public Warrants on the Nasdaq Stock Market LLC ("Nasdaq") following the Business Combination;
●
the impact of macroeconomic conditions and geopolitical turmoil on our business and operations;
●
our expectations regarding the period during which we will qualify as an emerging growth company under the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act") and as a smaller reporting company under the federal securities laws; and
●
our anticipated use of our existing cash, cash equivalents and marketable securities.
We have based these forward-looking
statements largely on our current expectations and projections about our business, the industry in which we operate and financial trends
that we believe may affect our business, financial condition, results of operations and prospects, and these forward-looking statements
are not guarantees of future performance or development. These forward-looking statements speak only as of the date of this prospectus
and are subject to a number of risks, uncertainties and assumptions described in "
Risk Factors
" and elsewhere in this
prospectus. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or
quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected
in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the
forward-looking statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements
contained herein until after we distribute this prospectus, whether as a result of any new information, future events or otherwise.
In addition, statements that
"we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon
information available to us as of the date of this prospectus, and while we believe such information forms a reasonable basis for such
statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an
exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and
you are cautioned not to unduly rely upon these statements.
xi
PROSPECTUS SUMMARY
The following summary
highlights information contained elsewhere in this prospectus. It does not contain all the information you should consider before investing
in our securities. You should read this entire prospectus carefully, including the sections titled "Risk Factors," "Business,"
"Management's Discussion and Analysis of Financial Condition and Results of Operations of CERo," "Where You Can
Find More Information," and our consolidated financial statements and related notes included elsewhere in this prospectus, before
making an investment decision.
Overview
We are an innovative immunotherapy
company advancing the development of next-generation engineered T cell therapeutics for the treatment of cancer. Our proprietary approach
to T cell engineering, which enables us to integrate certain desirable characteristics of both innate and adaptive immunity into a single
therapeutic construct, is designed to engage the body's full immune repertoire to achieve optimized cancer therapy. Our novel cellular
immunotherapy platform is designed to redirect patient-derived T cells to eliminate tumors by building in pathways that employ both cytotoxic
and phagocytic mechanisms to destroy cancer cells, creating what we refer to as Chimeric Engulfment Receptor T ("CER-T") cells.
Our lead molecule is CER-1236, an autologous T-cell product that targets a novel tumor antigen, TIM-4 ligand. Unlike currently approved
chimeric antigen receptor ("CAR-T") therapies which have largely been active in hematological B cell malignancies, we believe
CER-1236 will be efficacious in both hematological malignancies and solid tumors.
Recent Developments
Keystone Equity Financing
In February 2024, we entered
into a common stock purchase agreement (the "Old Keystone Purchase Agreement") with Keystone, pursuant to which we may sell
and issue, and Keystone is obligated to purchase, up to $25,000,000 of shares of Common Stock (the "Keystone Purchase Shares");
provided that the number of shares issued pursuant to the Old Keystone Purchase Agreement shall not exceed 25,000,000 shares (the "Initial
Limit"). As consideration for Keystone's commitment to purchase shares of Common Stock pursuant to the Keystone Purchase Agreements,
we issued an aggregate of 1,983,345 shares of Common Stock to Keystone (the "Keystone Commitment Shares"). As of the date
of this prospectus, we have issued and sold 23,377,921 shares of Common Stock for aggregate proceeds of $4,410,616 under the Keystone
Equity Financing. We previously filed a registration statement on Form S-1 (File No. 333-278603), which was declared effective by the
SEC on May 1, 2024, and remains in effect (the "Prior Registration Statement"), with respect to up to (i) 25,000,000 Keystone
Purchase Shares and (ii) 619,050 Keystone Commitment Shares.
In November 2024, in
order to enable us to issue and sell additional shares in excess of the Initial Limit and up to $25,000,000, we entered into the New
Keystone Purchase Agreement with Keystone, pursuant to which we may issue and sell up to $20,589,384 of shares of Common Stock.
Through December 16, 2024, we issued 1,800,000 shares of common stock for net proceeds of $186,300 pursuant to the New Keystone
Purchase Agreement.
We do not have a right to
commence any sales of Common Stock to Keystone under the New Keystone Purchase Agreement until the time when all of the conditions to
our right to commence sales of Common Stock to Keystone set forth in the New Keystone Purchase Agreement have been satisfied, including
the effectiveness of the registration statement of which this prospectus forms a part. We will control the timing and amount of any sales
of Common Stock to Keystone. Actual sales of shares of Common Stock to Keystone under the Keystone Purchase Agreements will depend on
a variety of factors to be determined by us from time to time, including, among others, market conditions, the trading price of the Common
Stock and determinations by us as to the appropriate sources of funding and our operations.
Concurrent with the execution
of the New Keystone Purchase Agreement, we entered into the New Keystone Registration Rights Agreement, pursuant to which we agreed to
provide Keystone with customary registration rights related to the shares issued under the New Keystone Purchase Agreement.
1
Third PIPE Financing
On September 25, 2024, we
consummated a private placement of 2,853 shares of Series C Preferred Stock and 8,175,166 Series C Warrants pursuant to the Third Securities
Purchase Agreement, by and among us and certain PIPE Investors for aggregate cash proceeds of approximately $1.25 million.
In connection with the Third
PIPE Financing, we entered into the Third PIPE Registration Rights Agreement with the PIPE Investors. The terms of the Third PIPE Registration
Rights Agreement require us to register the number of shares of Common Stock equal to the sum of (i) 250% of the maximum number of Common
Stock issuable upon conversion of the Series C Preferred Stock (assuming for purposes hereof that (x) the Series C Preferred Stock is
convertible at the Alternate Conversion Price (as defined in the Series C Certificate of Designations) assuming an Alternate Conversion
Date (as defined in the Series C Certificate of Designations) of such date of determination, and (y) any such conversion shall not take
into account any limitations on the conversion of the Series C Preferred Stock set forth in the Series C Certificate of Designations)
and (ii) the maximum number of Warrant Common Shares issuable upon exercise of the Warrants (without taking into account any limitations
on the exercise of the Warrants set forth therein).
Investigational New Drug Application
On June 28, 2024, we submitted
an investigational new drug application ("IND") for its product candidate, CER-1236, to the FDA. On July 26, 2024, we were
informed by the FDA that it has placed a clinical hold on the IND. The FDA indicated that the clinical hold has been placed as a result
of insufficient data provided with regard to two issues within pharmacology and toxicology of CER-1236. The FDA indicated that, within
30 calendar days, it would provide a detailed official hold letter and requested that the Company hold its response until after receipt
of such letter (the "Hold Letter"). The Company received the Hold Letter on July 26, 2024 and submitted a complete response
letter to the FDA on October 21, 2024 in which the Company requested a meeting to address the FDA's questions. On November 15, 2024
the Company received notice from the FDA that the IND for CER-1236 was cleared. The Company continues to believe that we will be able
to initiate the planned clinical trial by early 2025.
Nasdaq Letters
On July 19, 2024, we received
a letter (the "Bid Price Requirement Letter") from the staff at Nasdaq notifying us that, for the 30 consecutive trading days
prior to the date of the Bid Price Requirement Letter, the closing bid price for CERo Common Stock has been below the minimum $1.00 per
share required for continued listing on Nasdaq set forth in Nasdaq Listing Rule 5450(a)(1), which is required for continued listing of
the Common Stock on Nasdaq (the "Bid Price Requirement"). On October 23, 2024, the trading price for CERo Common Stock closed
under $0.10 and was the tenth consecutive trading day to do so. On October 24, 2024, the Company received a letter from the staff at The
Nasdaq Global Market ("Nasdaq") notifying the Company that, because its Common Stock had a closing bid price of $0.10 or less
for ten consecutive trading days, it was no longer eligible to rely upon the 180-day cure period set forth in the Bid Price Requirement
Letter. In addition, on October 30, 2024, the Company received a letter from the staff at Nasdaq notifying the Company that it had not
regained compliance with the continued listing requirement to maintain a minimum market value of $50,000,000 for its listed securities
within the 180-day compliance period granted by Nasdaq in May 2024.
On July 19, 2024, we also
received a letter (the "MVPHS Letter" and together with the Bid Price Requirement Letter, the "Nasdaq Letters")
from Nasdaq notifying us that the "Market Value of Publicly Held Shares" (the "MVPHS") of our Common Stock had
been below the minimum of $15,000,000 for the last 30 consecutive business days prior to the date of the MVPHS Letter, which is required
for continued listing of our Common Stock on Nasdaq pursuant to Nasdaq Listing Rule 5450(b)(2)(C) (the "MVPHS Requirement").
Such letters are in addition
to the letter from Nasdaq received by the Company on May 2, 2024 (the "MVLS Letter" and, together with the Bid Price Letter
and the MVPHS Letter, the "Letters") notifying the Company that the "Market Value of Listed Securities" ("MVLS")
of the Common Stock had traded below the minimum of $50,000,000 for the 30 consecutive trading days prior to the date of such MVLS Letter,
which is required for continued listing of the Common Stock on Nasdaq pursuant to Nasdaq Listing Rule 5450(b)(2)(A) (the "MVLS Requirement"
and, together with the Bid Price Requirement and the MVPHS Requirement, the "Requirements").
2
Each of the Bid Price Requirement
and MVLS Requirement deficiencies results in the commencement of delisting proceedings. However, the Company has requested a hearing from
Nasdaq and plans to submit a plan to regain compliance with the listing requirements at such hearing. Nasdaq has granted the requested
hearing and scheduled the hearing for December 17, 2024. Notwithstanding that applicable Nasdaq rules provide a 180-day compliance period
to regain compliance with the MVPHS Requirement, the plan submitted by the Company in connection with such hearing will be required to
demonstrate a pathway to compliance with all applicable deficiencies.
The Company intends to evaluate
available options to resolve these deficiencies and regain compliance with the Requirements. Such options may include seeking to qualify
for continued listing under a different continued listing standard of the Nasdaq Global Market or Nasdaq Capital Market, in lieu of the
MVPHS and MVLS requirements, including the Equity Standard, if the Company has sufficient stockholders' equity at such time. While
the Company is exercising diligent efforts to maintain the listing of its securities on Nasdaq, there can be no assurance that the Company
will be able to regain or maintain compliance with Nasdaq listing standards.
On November 11, 2024, the
Company's stockholders approved a reverse stock split ranging from 1:25 to 1:150. The stockholder approval of the reverse stock
split provides the Board of Directors with the authority to determine the exact ratio of the reverse stock split and implement such reverse
stock split within a year after the date of such approval. The Board of Directors expects to determine the ratio and implement the reverse
stock split prior to the Nasdaq hearing. Although such reverse stock split is expected to enable regaining compliance with the Bid Price
Requirement, it is not intended to contribute to regaining compliance with the other Requirements.
Summary Risk Factors
Investing in our securities
involves risks. If any of these risks actually occur, our business, financial condition and results of operations would likely be materially
adversely affected. You should carefully consider all the information contained in this prospectus before making a decision to invest
in our securities. In particular, you should consider the risk factors described under "
Risk Factors
" beginning on
page 9. Some of the principal risk factors are summarized below:
●
the shares of Common Stock being offered in this prospectus represent a substantial percentage of the outstanding shares of Common Stock, and the sales of such shares, or the perception that these sales could occur, could cause the market price of the Common Stock to decline significantly.
●
sales of a substantial number of our securities in the public market by our existing securityholders could cause the price of our Common Stock and Warrants to fall.
●
certain existing securityholders purchased our securities at a price below the current trading price of such securities, and may experience a positive rate of return based on the current trading price. Future investors in us may not experience a similar rate of return.
●
we have incurred significant losses in every year since our inception. We expect to continue to incur losses over the next several years and may never achieve or maintain profitability. Our independent registered public accountants have expressed substantial doubt as to our ability to continue as a going concern.
●
our business is highly dependent on the success of our lead product candidate. If we are unable to advance clinical development, obtain approval of and successfully commercialize our lead product candidate for the treatment of patients in approved indications, our business would be significantly harmed.
●
our engineered CER-T cells represent a novel approach to cancer treatment that creates significant challenges for us.
●
our preclinical programs may experience delays or may never advance to clinical trials, which would adversely affect our ability to obtain regulatory approvals or to commercialize these programs on a timely basis or at all, which would have an adverse effect on our business.
3
●
success in preclinical studies or clinical trials may not be indicative of results in future clinical trials.
●
manufacturing genetically engineered products is complex and we, or our third-party manufacturers, may encounter difficulties in production. If we or any of our third-party manufacturers encounter such difficulties, our ability to provide supply of our product candidates for clinical trials or our products for patients, if approved, could be delayed or prevented.
●
if we are unable to advance clinical development, obtain approval of and successfully commercialize our lead product candidate for the treatment of patients in approved indications, our business would be significantly harmed.
●
genetic engineering of T cells to create CER-T cells is a relatively new technology, and if we are unable to use this technology in our intended product candidates, our revenue opportunities will be materially limited.
●
we will depend on enrollment of patients in our clinical trials for our product candidates. If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.
●
we face competition from companies that have developed or may develop product candidates for the treatment of the diseases that we may target, including companies developing novel therapies and platform technologies. If these companies develop platform technologies or product candidates more rapidly than we do, if their platform technologies or product candidates are more effective or have fewer side effects, our ability to develop and successfully commercialize product candidates may be adversely affected.
●
we operate in a rapidly changing industry and face significant competition, which may result in others discovering, developing or commercializing products before or more successfully than we do.
●
we are highly dependent on our key personnel, including individuals with expertise in cell therapy development and manufacturing, and if we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.
●
we will need substantial additional financing to develop our products and implement our operating plans, which financing we may be unable to obtain, or unable to obtain on acceptable terms. If we fail to obtain additional financing, we may be unable to complete the development and commercialization of our product candidates.
●
we maintain single supply relationships for certain key components, and our business and operating results could be harmed if supply is restricted or ends or the price of raw materials used in our suppliers' manufacturing process increases.
●
regulatory requirements in the United States and abroad governing cell therapy products have changed frequently and may continue to change in the future, which could negatively impact our ability to complete clinical trials and commercialize our product candidates in a timely manner, if at all.
●
our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services and brand.
●
an active trading market for our Common Stock may not be available on a consistent basis to provide stockholders with adequate liquidity. The price of our Common Stock may be extremely volatile, and stockholders could lose all or part of their investment.
●
our failure to meet the continued listing requirements of Nasdaq could result in a delisting of our securities.
●
since the completion of our Initial Public Offering, there has been a precipitous drop in the market values of companies formed through mergers involving special purpose acquisition companies. Accordingly, securities of companies such as ours may be more volatile than other securities and may involve special risks.
4
●
securities of companies formed through mergers with special purpose acquisition companies such as ours may experience a material decline in price relative to the share price of the special purpose acquisition companies prior to the merger.
●
our
Public Warrants will become exercisable for our common stock, which would increase the number of shares eligible for future resale in
the public market and would result in dilution to our stockholders.
●
the
issuance of shares of our Common Stock upon conversion or exercise of our outstanding Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series C Warrants and other securities that we may issue in future financing transactions may result in substantial
dilution to our stockholders.
●
there
is no public market for Offered Common Warrants or the Pre-Funded Warrants to purchase shares of our common stock being offered by us
in this offering.
Implications of Being an Emerging Growth Company
and a Smaller Reporting Company
We are an "emerging
growth company" as defined in Section 2(a) of the Securities Act, as modified by the JOBS Act, and we may take advantage of certain
exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including,
but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced
disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements
of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously
approved.
Further, Section 102(b)(1)
of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until
private companies (that is, those that have not had a registration statement under the Securities Act declared effective or do not have
a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards.
The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply
to non-emerging growth companies but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition
period, which means that when a standard is issued or revised and it has different application dates for public or private companies,
we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparability of our financial statements with another public company which is neither an emerging growth company nor an
emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential differences
in accounting standards used.
We will remain an emerging
growth company until the earlier of: (1) the last day of the fiscal year (a) following the fifth anniversary of the effectiveness of the
registration statement filed in connection with the Initial Public Offering, (b) in which we have total annual gross revenue of at least
$1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common equity that
is held by non-affiliates exceeds $700 million as of the end of the prior fiscal year's second fiscal quarter; and (2) the date
on which we have issued more than $1.00 billion in non-convertible debt securities during the prior three-year period. References herein
to "emerging growth company" have the meaning associated with it in the JOBS Act.
As a result of this status,
we have taken advantage of reduced reporting requirements in this prospectus. In particular, in this prospectus, we have not included
all of the executive compensation-related information that would be required if we were not an emerging growth company.
5
Additionally, we are a "smaller
reporting company" as defined in Item 10(f)(1) of Regulation S-K, which allows us to take advantage of certain exemptions from disclosure
requirements including exemption from compliance with the auditor attestation requirements of Section 404. We will remain a smaller reporting
company until the last day of the fiscal year in which (i) the market value of the shares of our Common Stock held by non-affiliates exceeds
$250 million as of the prior June 30, and (ii) our annual revenue exceeded $100 million during such completed fiscal year or the market
value of the shares of our Common Stock held by non-affiliates exceeds $700 million as of the prior June 30. To the extent we take advantage
of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult
or impossible.
Additional Information
We were incorporated under
the laws of the State of Delaware on June 8, 2021 under the name "Phoenix Biotech Acquisition Corp." for the purpose of effecting
a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or similar business combination with one or more businesses.
Legacy CERo was founded in 2016. In connection with the Business Combination, we changed our name to "CERo Therapeutics Holdings,
Inc."
The mailing address of our
principal executive office is 201 Haskins Way, Suite 230, South San Francisco, CA 94080, and the telephone number is (650) 407-2736. Our
website is
www.cero.bio
. Information contained on or accessible through our website is not a part of or incorporated by reference
into this prospectus and the inclusion of our website address in this prospectus is an inactive textual reference only.
6
THE OFFERING
Issuer
CERo Therapeutics Holdings, Inc., a Delaware corporation.
Shares of Common Stock offered by us
Up to [____] shares of our Common Stock, consisting of:
Pre-funded warrants offered by us
Each purchaser whose purchase of shares in this offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding Common Stock immediately following the consummation of this offering, has the opportunity to purchase, if the purchaser so chooses, Pre-Funded Warrants (each Pre-Funded Warrant to purchase one share of our Common Stock) in lieu of shares that would otherwise result in the purchaser's beneficial ownership exceeding 4.99% of our outstanding Common Stock (or, at the election of the purchaser, 9.99%). The purchase price of each Pre-Funded Warrant will equal the price at which one share of Common Stock is being sold to the public in this offering, minus $0.001, and the exercise price of each Pre-Funded Warrant will be $0.001 per share. The Pre-Funded Warrants will be immediately exercisable and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full. For each Pre-Funded Warrant we sell, the number of shares of Common Stock we are offering will be decreased on a one-for-one basis. We are also registering the shares of Common Stock issuable upon the exercise of the Pre-Funded Warrants.
Common warrants to be Offered
Offered Common Warrants to purchase up to [____] shares of Common Stock. Each share of Common Stock is being sold together with an Offered Common Warrant to purchase [____] share of Common Stock. Each Offered Common Warrant has an exercise price of $[__] per share, will be immediately exercisable and will expire on the fifth anniversary of the original issuance date. The exercise price is subject to customary adjustments for stock splits and similar recapitalization transactions. The shares of Common Stock and the accompanying Offered Common Warrants can only be purchased together in this offering but will be issued separately and will be immediately separable upon issuance.
Shares of Common Stock outstanding immediately prior to this offering
191,881,107 shares.
Shares of Common Stock outstanding immediately following this offering
[____] shares, assuming no sale of Pre-Funded Warrants, which, if sold, would reduce the number of shares of Common Stock that we are offering on a one-for-one basis, and further assuming no exercise of any Offered Common Warrants.
Terms of the offering
This offering will terminate on [____], 2024, unless we decide to terminate the offering (which we may do at any time in our discretion) prior to that date.
Use of proceeds
We intend to use the net proceeds from this offering, together with our existing cash, to advance our clinical programs, for working capital and other general corporate purposes. See "
Use of Proceeds
" for additional information.
7
Common Stock ticker symbol
Our Common Stock is listed on the Nasdaq Global
    Market under the symbol "CERO". There is no established trading market for the Pre-Funded Warrants and Offered Common
    Warrants, and we do not expect a trading market to develop.
We do not intend to list the Offered Common Warrants
    or the Pre-Funded Warrants on any securities exchange or other trading market. Without a trading market, the liquidity of the Offered
    Common Warrants an Pre-Funded Warrants will be extremely limited.
Risk factors
Any investment in the securities offered hereby is speculative and involves a high degree of risk. You should carefully consider the information set forth under
"Risk Factors"
and elsewhere in this prospectus.
The number of shares of Common
Stock that will be outstanding after this offering is based on 191,881,107 shares of Common Stock outstanding as of December 16, 2024,
and excludes:
●
6,107,373 shares of Common Stock underlying outstanding options;
●
21,910,608 shares of Common Stock issuable under our 2016 Plan and our 2024 Plan, which
                                                                                       includes 21,910,608 shares of Common Stock reserved for issuance under our 2016 Plan and our 2024 Plan;
●
572,182 shares of Common Stock issuable under our 2024 ESPP, which includes 572,182 shares of Common
                                                                                       Stock reserved for issuance under our 2024 ESPP;
●
9,517,499 shares of Common Stock issuable upon the exercise of Public Warrants and Private
                                                                                       Placement Warrants;
●
8,787,912 shares of Common Stock issuable upon the exercise of Common Warrants issued in the
                                                                                       offerings of our Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock;
●
117,286,607 shares of Common Stock issuable upon conversion of the Series A Preferred Stock,
                                                                                       Series B Preferred Stock, and Series C Preferred Stock, including 39,075,000 shares issuable upon the exercise of Preferred
                                                                                       Warrants;
●
[___] shares of Common Stock issuable upon the exercise of
Offered Common Warrants issued in this offering described in this prospectus; and
●
[___] shares of Common Stock issuable upon the exercise of
Pre-Funded Warrants, if issued in this offering described in this prospectus.
8
RISK FACTORS
Investing in our securities
involves a high degree of risk. Before you decide to invest in our securities, you should consider carefully the risks described below,
together with the other information contained in this prospectus, including our financial statements and the related notes appearing at
the end of this prospectus. We believe the risks described below are the risks that are material to us as of the date of this prospectus.
If any of the following risks actually occur, our business, results of operations and financial condition would likely be materially and
adversely affected. In these circumstances, the market price of our securities could decline, and you may lose part or all of your investment
.
Risks Related to this Offering
There is no public market for Offered Common
Warrants or the Pre-Funded Warrants to purchase shares of our Common Stock being offered by us in this offering.
There is no established public
trading market for the Offered Common Warrants or the Pre-Funded Warrants to purchase shares of our Common Stock that are being offered
as part of this offering, and we do not expect a market to develop. In addition, we do not intend to apply to list the Offered Common
Warrants or the Pre-Funded Warrants on any national securities exchange or other nationally recognized trading system, including the Nasdaq
Global Market. Without an active market, the liquidity of the Offered Common Warrants and the Pre-Funded Warrants will be limited.
The Offered Common Warrants and the Pre-Funded
Warrants are speculative in nature.
The Offered Common Warrants and the Pre-Funded
Warrants do not confer any rights of Common Stock ownership on their holders, such as voting rights or the right to receive dividends,
but rather merely represent the right to acquire shares of Common Stock at a fixed price. Specifically, commencing on the date of issuance,
holders of the Offered Common Warrants may exercise their right to acquire Common Stock and pay an exercise price of $[__] per share,
subject to certain adjustments, prior to five years from the date on which such Offered Common Warrants were issued, after which date
any unexercised Offered Common Warrants will expire and have no further value. Holders of Pre-Funded Warrants have identical rights, except
that the Pre-Funded Warrants have an exercise price of $0.001 and do not expire until exercised in full. Moreover, following this offering,
the market value of the Offered Common Warrants and Pre-Funded Warrants, if any, is uncertain and there can be no assurance that the market
value of the Offered Common Warrants or the Pre-Funded Warrants will equal or exceed their imputed offering price.
Holders of the Offered Common Warrants and
Pre-Funded Warrants offered hereby will have no rights as common stockholders with respect to the shares our common stock underlying the
Offered Common Warrants and Pre-Funded Warrants until such holders exercise their Offered Common Warrants and Pre-Funded Warrants and
acquire our common stock, except as otherwise provided in the Offered Common Warrants and Pre-Funded Warrants.
Until holders of the Offered Common Warrants
and Pre-Funded Warrants acquire shares of our Common Stock upon exercise thereof, such holders will have no rights with respect to
the shares of our Common Stock underlying such warrants. Upon exercise of the Offered Common Warrants and Pre-Funded Warrants, the
holders will be entitled to exercise the rights of a common stockholder only as to matters for which the record date occurs after
the exercise date. This is a best efforts offering, no minimum amount of securities is required to be sold, and we may not raise the
amount of capital we believe is required for our business plan.
The placement agent has agreed to use its reasonable
best efforts to solicit offers to purchase the securities in this offering. The placement agent has no obligation to buy any of the securities
from us or to arrange for the purchase or sale of any specific number or dollar amount of the securities. There is no required minimum
number of securities that must be sold as a condition to completion of this offering. Because there is no minimum offering amount required
as a condition to the closing of this offering, the actual offering amount, placement agent fees and proceeds to us are not presently
determinable and may be substantially less than the maximum amounts contemplated in this prospectus. We may sell fewer than all of the
securities offered hereby, which may significantly reduce the amount of proceeds received by us, and investors in this offering will not
receive a refund in the event that we do not sell an amount of securities sufficient to support our continued operations, including our
near-term continued operations.
9
Our management has broad discretion as to
the use of the net proceeds from this offering.
Our management will have broad discretion in the
application of the net proceeds from this offering, including for any of the purposes described in the section titled "Use of Proceeds."
Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use
may vary substantially from their currently intended use. Our management might not apply our net proceeds in ways that ultimately increase
the value of your investment, and the failure by our management to apply these funds effectively could harm our business. If we do not
invest or apply the net proceeds from this offering in ways that enhance stockholder value, we may fail to achieve expected results, which
could cause our Common Stock price to decline.
If you purchase securities in this offering,
you will experience immediate and substantial dilution and may experience additional dilution in the future.
Investors purchasing shares of our Common Stock,
or Pre-Funded Warrants in lieu thereof, and accompanying Offered Common Warrants in this offering will pay a price per share that substantially
exceeds the as adjusted net tangible book value per share. As a result, investors purchasing our Common Stock and accompanying Offered
Common Warrants in this offering will incur immediate dilution of $[__] per share, representing the difference between the assumed public
offering price of $[__] per share, which is the last reported sale price of our Common Stock on the Nasdaq Global Market on	 [__],
2024, and our as adjusted net tangible book value as of September 30, 2024. For more information on the dilution you may suffer as a result
of investing in this offering, see "Dilution."
Because there is no minimum required for
the offering to close, investors in this offering will not receive a refund in the event that we do not sell an amount of securities sufficient
to pursue the business goals outlined in this prospectus.
We have not specified a minimum offering amount
nor have or will we establish an escrow account in connection with this offering. Because there is no escrow account and no minimum offering
amount, investors could be in a position where they have invested in our company, but we are unable to fulfill our objectives due to a
lack of interest in this offering. Further, because there is no escrow account in operation and no minimum investment amount, any proceeds
from the sale of securities offered by us will be available for our immediate use, despite uncertainty about whether we would be able
to use such funds to effectively implement our business plan. Investor funds will not be returned under any circumstances whether during
or after the offering.
Risks Related to our Business and Industry
We have incurred significant losses in every
year since our inception. We expect to continue to incur losses over the next several years and may never achieve or maintain profitability.
We are a preclinical
stage biopharmaceutical company with a limited operating history, and we have incurred significant net losses since our inception in
2016. We incurred net losses of approximately $7.3 million and $11.8 million for the years ended December 31, 2023 and 2022,
respectively. Additionally, we incurred a net loss of approximately $8.4 million for the nine month period ended September 30, 2024.
As of September 30, 2024, we had an accumulated deficit of $71.6 million. We have funded our operations to date primarily with
proceeds from the sale of our equity securities in private financing transactions.
We have no products approved
for commercial sale and we are devoting, and expect to continue devoting, substantially all of our financial resources and efforts to
R&D of our only programmed CER-T cell product candidate, CER-1236, as well as to building out our manufacturing infrastructure, CDMO
relationships and CER-T cell programming technologies. Investment in biopharmaceutical product development, especially preclinical products,
is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential product candidate
will not successfully undergo or complete necessary clinical trials, fail to demonstrate adequate effect or an acceptable safety profile,
gain regulatory approval and become commercially viable.
10
We expect that it could take
several years until any of our product candidates, which at present is solely CER-1236, receive regulatory and marketing approval
and are commercialized, and we may never be successful in obtaining regulatory and marketing approval and commercializing product candidates.
We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. These net losses will
adversely impact our stockholders' equity and net assets and may fluctuate significantly from quarter to quarter and year to year.
We anticipate that our expenses will increase substantially as we:
●
continue our ongoing and planned R&D activities for our CER-T cell therapies and product candidates;
●
pursue preclinical studies and initiate clinical trials for our CER-T cell therapies and other product candidates;
●
seek to discover and develop additional product candidates and further expand our product pipeline;
●
seek regulatory and marketing approvals for any product candidates that successfully complete clinical trials;
●
establish sales, marketing and distribution infrastructure to commercialize any product candidate for which we may obtain regulatory approval;
●
develop and refine the manufacturing process for our product candidates;
●
change or add additional manufacturers or suppliers of biological materials or product candidates;
●
establish or supplement relationships with CDMOs, CROs and other third party collaborators;
●
develop, maintain, expand and protect our intellectual property portfolio;
●
acquire or in-license other product candidates and technologies;
●
hire clinical, quality control and manufacturing personnel;
●
add clinical, operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts; and
●
incur additional legal, accounting and other expenses associated with operating as a public company.
To become and remain profitable,
we must succeed in developing and eventually commercializing products that generate significant revenue. This will require us to be successful
in a range of challenging activities, including completing preclinical studies and clinical trials for our product candidates, preparing
a satisfactory filing package for regulatory authorities, obtaining regulatory approval, manufacturing, marketing and selling any products
for which we may obtain regulatory approval, as well as discovering and developing additional product candidates. We may never succeed
in these activities and, even if we do, may never generate revenues that are significant enough to achieve profitability.
Because of the numerous risks
and uncertainties associated with the development, manufacturing, delivery and commercialization of complex autologous cell therapies,
we are unable to accurately predict the timing or amount of expenses or when, or if, we will be able to achieve profitability. If we are
required by regulatory authorities to perform studies in addition to those currently expected, or if there are any delays in the initiation
and completion of our clinical trials or the development of any of our product candidates, our expenses could increase and profitability
could be further delayed.
Even if we achieve profitability,
we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would
depress the value of our securities and could impair our ability to raise capital, expand our business, maintain our R&D efforts or
continue our operations. A decline in the value of our securities could also cause you to lose all or part of your investment.
11
Our independent registered public accountants
have expressed substantial doubt as to our ability to continue as a going concern.
In its report on our financial
statements for the year ended December 31, 2023, our independent registered public accounting firm included an explanatory paragraph that
expressed substantial doubt about our ability to continue as a going concern. Our current cash level raises substantial doubt about our
ability to continue as a going concern. In addition, our future financial statements may include similar qualifications about our ability
to continue as a going concern. Our financial statements were prepared assuming that we will continue as a going concern and do not include
any adjustments that may result from the outcome of this uncertainty. If we are unable to meet our current operating costs, we will need
to seek additional financing or modify or cease our operational plans. If we seek additional financing to fund our business activities
in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources
may be unwilling to provide additional funding to us on commercially reasonable terms or at all.
Our limited operating history makes it difficult
to evaluate our business and assess our future viability and prospects.
We are a preclinical stage
company with a limited operating history. We commenced operations in 2016, and our operations to date have been limited to organizing
and planning our development efforts, raising capital, conducting discovery and research activities, filing patent applications, identifying
potential product candidates, undertaking preclinical studies, and establishing arrangements with third parties for the manufacture of
initial quantities of CER-1236 and component materials. We have not yet demonstrated our ability to successfully complete any clinical
trials, obtain regulatory approvals, manufacture a commercial-scale product or arrange for a third party to do so on our behalf, or conduct
sales, marketing and distribution activities necessary for successful product commercialization. Consequently, any predictions you make
about our future success or viability may not be as accurate as they could be if we had a longer operating history.
In addition, as a young business,
we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors. We will need to transition
at some point from a company with a R&D focus to a company capable of supporting commercial activities. We may not be successful in
such a transition.
We expect our financial condition
and operating results to continue to fluctuate significantly from quarter to quarter and year to year due to a variety of factors, many
of which are beyond our control. Accordingly, you should not rely upon the results of any quarterly or annual periods as indications of
future operating performance.
Our business is highly dependent on the
success of our lead product candidate. If we are unable to advance clinical development, obtain approval of and successfully commercialize
our lead product candidate for the treatment of patients in approved indications, our business would be significantly harmed.
Our business and future success
depends on our ability to advance clinical development, obtain regulatory approval of, and then successfully commercialize, CER-1236,
our lead product candidate. Because our CER-1236 product candidate will be among the first autologous T cell product candidates engineered
with cytotoxic and phagocytic potency to be evaluated in clinical trials, the failure of such product candidate, or the failure of other
autologous T cell therapies, including for reasons due to safety, efficacy or durability, may impede our ability to develop our product
candidates, and significantly influence physicians' and regulators' opinions with regard to the viability of our entire pipeline
of autologous T cell therapies.
All of our product candidates,
including our lead product candidate, will require additional preclinical, clinical and non-clinical development, regulatory review and
approval in multiple jurisdictions, substantial investment, access to sufficient commercial manufacturing capacity and significant marketing
efforts before we can generate any revenue from product sales. In addition, because our other product candidates are based on similar
technology as our lead product candidate, if the lead product candidate encounters additional safety issues, efficacy problems, manufacturing
problems, developmental delays, regulatory issues or other problems, our development plans and business would be significantly harmed.
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We have not generated any revenue and may
never be profitable.
Our ability to become profitable
depends upon our ability to generate revenue. To date, we have not generated any revenue. We do not expect to generate significant revenue
unless or until we successfully complete clinical development and obtain regulatory approval of, and then successfully commercialize,
our product candidates. We do not know when, or if, we will generate any revenue. All of our product candidates, including CER-1236, are
in the preclinical stages of development and will require additional preclinical studies, clinical development regulatory review and approval,
substantial investment, access to sufficient commercial manufacturing capacity and significant marketing efforts before we can generate
any revenue from product sales. Our ability to generate revenue depends on a number of factors, including, but not limited to, our ability
to:
●
successfully complete preclinical studies and clinical trials for our CER-T cell product candidates;
●
timely file and receive acceptance of INDs, and amendments thereto, as applicable, in order to commence our planned and future clinical trials;
●
successfully enroll subjects in, and complete, clinical trials for our CER-T cell product candidates;
●
hire additional staff, including clinical, scientific and management personnel;
●
timely file BLAs and receive regulatory approvals for our product candidates from the FDA and other regulatory authorities;
●
initiate and successfully complete clinical trials and safety studies required to obtain U.S. and applicable foreign marketing approval for our product candidates;
●
establish commercial manufacturing capabilities through third-party manufacturers and CDMOs for clinical supply and commercial manufacturing of our product candidates;
●
obtain and maintain patent and trade secret protection or regulatory exclusivity for our product candidates;
●
launch commercial sales of our product candidates, if and when approved, whether alone or in collaboration with others;
●
maintain a continued acceptable safety profile of the product candidates following approval;
●
obtain and maintain acceptance of the product candidates, if and when approved, by patients, the medical community and third-party payors;
●
position our products to effectively compete with other therapies;
●
obtain and maintain favorable coverage and adequate reimbursement by third-party payors for our product candidates; and
●
enforce and defend intellectual property rights and claims with respect to our product candidates.
Many of the factors listed
above are beyond our control and could cause us to experience significant delays or prevent us from obtaining regulatory approvals or
commercialize our product candidates. Even if we are able to commercialize our product candidates, we may not achieve profitability soon
after generating product sales, if ever. If we are unable to generate sufficient revenue through the sale of our product candidates or
any future product candidates, we may be unable to continue operations without continued funding.
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Our engineered CER-T cells represent a novel
approach to cancer treatment that creates significant challenges for us.
We are developing autologous
T-cell product candidates that are engineered from healthy donor T-cells to express chimeric engulfment receptors ("CERs")
and are intended for use in patients with certain cancers. Advancing these novel product candidates creates significant challenges for
us, including:
●
manufacturing our product candidates to our or regulatory specifications and in a timely manner to support our clinical trials, and, if approved, commercialization;
●
sourcing clinical and, if approved, commercial supplies for the raw materials used to manufacture our product candidates;
●
understanding and addressing variability in the quality of a donor's T cells, which could ultimately affect our ability to produce product in a reliable and consistent manner and treat certain patients;
●
educating medical personnel regarding the potential side effect profile of our product candidates, if approved, such as the potential adverse side effects related to CRS, neurotoxicity, prolonged cytopenia, coagulation abnormalities, thrombosis, hypotension, aplastic anemia and neutropenic sepsis;
●
using medicines to preempt or manage adverse side effects of our product candidates and such medicines may be difficult to source or costly or may not adequately control the side effects or may have other safety risks or a detrimental impact on the efficacy of the treatment;
●
conditioning patients with cyclophosphamide, fludarabine, or bendamustine in advance of administering our product candidates, which may be difficult to source, costly or increase the risk of infections and other adverse side effects;
●
obtaining regulatory approval, as the FDA and other regulatory authorities have limited experience with development of CER T cell therapies for cancer;
●
establishing sales and marketing capabilities upon obtaining any regulatory approval to gain market acceptance of a novel therapy; and
●
obtaining acceptance and approval by physicians, patients, hospitals, cancer treatment centers and others in the medical community.
Our preclinical programs may experience
delays or may never advance to clinical trials, which would adversely affect our ability to obtain regulatory approvals or to commercialize
these programs on a timely basis or at all, which would have an adverse effect on our business.
Our product candidates, including
CER-1236, are in the preclinical development stage. The risk of failure of preclinical programs is high. Before we can commence clinical
trials for a product candidate, we are nearing completion of extensive preclinical testing and studies to obtain regulatory clearance
to initiate human clinical trials with CER-1236, and have engaged in a pre-IND meeting with the FDA. We expect that our clinical
trials will be conducted on populations based in the United States and Europe. We cannot be certain of the timely completion or outcome
of our preclinical testing and studies and cannot predict if the FDA, the EMA or other regulatory authorities will accept our proposed
clinical programs or if the outcome of our preclinical testing and studies will ultimately support the further development of our programs.
As a result, we cannot be sure that we will be able to submit INDs or similar applications for our clinical programs on the timelines
we expect, if at all.
Success in preclinical studies or clinical
trials may not be indicative of results in future clinical trials.
Results from preclinical
studies are not necessarily predictive of future clinical trial results, and interim results of a clinical trial are not necessarily indicative
of final results. Our product candidates may ultimately fail to show the desired safety and efficacy in clinical settings despite positive
results in preclinical studies or having successfully advanced through initial clinical trials. This failure to establish sufficient efficacy
and safety could cause us to abandon clinical development of our product candidates.
14
Manufacturing genetically engineered products
is complex and we, or our third-party manufacturers, may encounter difficulties in production. If we or any of our third-party manufacturers
encounter such difficulties, our ability to provide supply of our product candidates for clinical trials or our products for patients,
if approved, could be delayed or prevented.
Manufacturing genetically
engineered products is complex and may require the use of innovative technologies to handle living cells. Manufacturing these products
requires facilities specifically designed for and validated for this purpose and sophisticated quality assurance and quality control procedures
are necessary. Slight deviations anywhere in the manufacturing process, including filling, labeling, packaging, storage and shipping and
quality control and testing, may result in failures, product recalls or spoilage. When changes are made to the manufacturing process,
we may be required to provide preclinical and clinical data showing the comparable identity, strength, quality, purity or potency of the
products before and after such changes. If microbial, viral or other contaminations are discovered at manufacturing facilities, such facilities
may need to be closed for an extended period of time to investigate and remedy the contamination, which could delay clinical trials and
adversely harm our business. The use of biologically derived ingredients can also lead to allegations of harm, including infections or
allergic reactions, or closure of product facilities due to possible contamination.
In addition, there are risks
associated with large scale manufacturing for clinical trials or commercial scale including, among others, cost overruns, potential problems
with process scale-up, process reproducibility, stability issues, compliance with good manufacturing practices, lot consistency and timely
availability of raw materials. Even if we obtain marketing approval for any of our product candidates, there is no assurance that we or
our manufacturers will be able to manufacture the approved product to specifications acceptable to the FDA, the EMA or other comparable
foreign regulatory authorities, to produce it in sufficient quantities to meet the requirements for the potential commercial launch of
the product or to meet potential future demand. If we or our manufacturers are unable to produce sufficient quantities for clinical trials
or for commercialization, our development and commercialization efforts would be impaired, which would have an adverse effect on our business,
financial condition, results of operations and growth prospects.
Genetic engineering of T cells to create
CER-T cells is a relatively new technology, and if we are unable to use this technology in our intended product candidates, our revenue
opportunities will be materially limited.
Our technology involves a
relatively new approach to T cell gene therapy. This technology may also not be shown to be effective in clinical studies that we may
conduct, or may be associated with safety issues that may negatively affect the development of our product candidates. For instance, lentiviral
gene transduction may create unintended changes to the DNA such as a non-target site gene insertion, a large deletion, or a DNA translocation,
any of which could lead to oncogenesis.
We may not be successful in our efforts
to identify or discover additional product candidates.
The success of our business
depends primarily upon our ability to identify, develop and commercialize products based on our CER-T cell technology. Our research programs
may fail to identify other potential product candidates outside of CER-1236 for clinical development for a number of reasons. We may be
unsuccessful in identifying potential product candidates or our potential product candidates may be shown to have harmful side effects
or may have other characteristics that may make the products unmarketable or unlikely to receive marketing approval. Research programs
to identify new product candidates require substantial technical, financial and human resources. We may focus our efforts and resources
on potential programs or product candidates that ultimately prove to be unsuccessful. If any of these events occur, we may be forced to
abandon our research, development or commercialization efforts for a program or programs, which would have a material adverse effect on
our business and could potentially cause us to cease operations.
15
Even if we obtain regulatory approval of
a product candidate, the product may not gain market acceptance among physicians, patients, hospitals, cancer treatment centers and others
in the medical community.
The use of engineered T cells
as a potential cancer treatment is nascent and may not become broadly accepted by physicians, patients, hospitals, cancer treatment centers
and others in the medical community. We expect physicians with expertise in immunotherapy to be particularly important to the market acceptance
of our products and we may not be able to educate them on the benefits of using our product candidates for many reasons. For example,
certain of the product candidates that we will be developing may result in unacceptable and unanticipated side effects, including death.
Additional factors will influence whether our product candidates are accepted in the market, including:
●
the clinical indications for which our product candidates are approved;
●
physicians, hospitals, cancer treatment centers and patients considering our product candidates as a safe and effective treatment;
●
the potential and perceived advantages of our product candidates over alternative treatments;
●
the prevalence and severity of any side effects;
●
product labeling or product insert requirements of the FDA or other regulatory authorities;
●
limitations or warnings contained in the labeling approved by the FDA or other regulatory authorities;
●
the timing of market introduction of our product candidates as well as competitive products;
●
the cost of treatment in relation to alternative treatments;
●
the availability of coverage and adequate reimbursement by third-party payors and government authorities;
●
the willingness of patients to pay out-of-pocket in the absence of coverage and adequate reimbursement by third-party payors and government authorities;
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relative convenience and ease of administration, including as compared to alternative treatments and competitive therapies; and
●
the effectiveness of our sales and marketing efforts.
If our product candidates
are approved but fail to achieve market acceptance among physicians, patients, hospitals, cancer treatment centers or others in the medical
community, we will not be able to generate significant revenue. Even if our products achieve market acceptance, we may not be able to
maintain that market acceptance over time if new products or technologies are introduced that are more favorably received than our products,
are more cost effective or render our products obsolete.
Data from our preclinical studies is limited
and may change as patient data become available or may not be validated in any future or advanced clinical trial.
Data from preclinical studies
and any clinical trials that we may complete is subject to the risk that one or more of the clinical outcomes may materially change as
patient enrollment continues and more patient data becomes available. For example, preclinical and Phase 1 results are preliminary
in nature and should not be viewed as predictive of ultimate success. It is possible that such results will not continue or may not be
repeated in any clinical trial of our product candidates. For instance, our preclinical studies provide limited data and any clinical
trials may not validate such results. Additionally, manufacturing can impact clinical outcomes and we have not yet completed manufacturing
runs with a CDMO. We may also fail to develop and transfer to a CDMO any optimized manufacturing processes for any of our programs.
Ultimately, if we cannot manufacture our product candidates with consistent and reproducible product characteristics, our ability to develop
and commercialize any product candidate would be significantly impacted.
Preliminary data also remains
subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we
previously published. As a result, initial, interim and preliminary data should be viewed with caution until the final data are available.
Adverse differences between preliminary or interim data and final data could significantly harm our business prospects.
16
We may not be able to file INDs or IND amendments
to commence clinical trials on the timelines we expect, and even if we are able to, the FDA may not permit us to proceed.
The IND for CER-1236 was
filed on June 28, 2024 and on November 15, 2024, the FDA cleared us to begin clinical trials, but there are no assurances regarding the
acceptance of any amendments or future INDs, which may impact the timelines we expect. For example, we may experience manufacturing delays
or other delays with future IND-enabling studies. Moreover, there can be no assurances that once trials begin, issues will not arise that
suspend or terminate such clinical trials. Additionally, even if such regulatory authorities agree with the design and implementation
of the clinical trials set forth in an IND, we cannot guarantee that such regulatory authorities will not change their requirements in
the future. These considerations also apply to new clinical trials we may submit as amendments to existing INDs.
Clinical trials are difficult to design
and implement, involve uncertain outcomes and may not be successful.
Human clinical trials are
difficult to design and implement, in part because they are subject to rigorous regulatory requirements. The design of a clinical trial
can determine whether its results will support approval of a product, and flaws in the design of a clinical trial may not become apparent
until the clinical trial is well advanced. We may be unable to design and execute a clinical trial that will be successful to achieve
regulatory approval. There is a high failure rate for biological products proceeding through clinical trials, which may be higher for
our product candidates because they are based on new technology and engineered on a patient-by-patient basis. Many companies in the pharmaceutical
and biotechnology industries have suffered significant setbacks in late-stage clinical trials even after achieving promising results in
preclinical testing and earlier-stage clinical trials. Data obtained from preclinical and clinical activities are subject to varying interpretations,
which may delay, limit or prevent regulatory approval. In addition, we may experience regulatory delays or rejections as a result of many
factors, including changes in regulatory policy during the period of our product candidate development. Any such delays could negatively
impact our business, financial condition, results of operations and prospects.
We will depend on enrollment of patients
in our clinical trials for our product candidates. If we encounter difficulties enrolling patients in our clinical trials, our clinical
development activities could be delayed or otherwise adversely affected.
Identifying and qualifying
patients to participate in clinical trials of our product candidates will be critical to our success. We may experience difficulties in
patient enrollment in our clinical trials for a variety of reasons. The timely completion of clinical trials in accordance with their
protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the study until its conclusion.
The enrollment of patients depends on many factors, including:
●
the patient eligibility criteria defined in the protocol;
●
the number of patients with the disease or condition being studied;
●
the perceived risks and benefits of the product candidate in the trial;
●
clinicians' and patients' perceptions as to the potential advantages of the product candidate being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating or drugs that may be used off-label for these indications;
●
the size and nature of the patient population required for analysis of the trial's primary and secondary endpoints;
●
the proximity of patients to study sites;
●
the design of the clinical trial;
●
our ability to recruit clinical trial investigators with the appropriate competencies and experience;
17
●
competing clinical trials for similar therapies or other new therapeutics not involving T cell-based immunotherapy;
●
our ability to obtain and maintain patient consents;
●
the risk that patients enrolled in clinical trials will drop out of the clinical trials before completion of their treatment; and
●
other public health factors, including the coronavirus pandemic or outbreaks of other infections.
In particular, some of our
clinical trials will look to enroll patients with characteristics which are found in a very small population. For example, our clinical
trial for CER-1236 will seek to enroll patients with hematologic malignancies, including AML, MCL, CLL, and other B cell and myeloid
neoplasms. Other companies are conducting clinical trials with their engineered T cell therapies in hematologic malignancies and seek
to enroll patients in their studies that may otherwise be eligible for our clinical trials, which could lead to slow recruitment and delays
in our clinical trials. In addition, since the number of qualified clinical investigators is limited, we expect to conduct some of our
clinical trials at the same clinical trial sites that some of our competitors use, which could further reduce the number of patients who
are available for our clinical trials in these clinical trial sites.
Moreover, because our product
candidates represent a departure from more commonly used methods for cancer treatment, potential study participants and their doctors
may be inclined to use conventional therapies, such as chemotherapy and antibody therapy, rather than participate in our clinical trials.
Delays in patient enrollment
may result in increased costs or may affect the timing or outcome of the planned clinical trials, which could prevent completion of these
clinical trials and adversely affect our ability to advance the development of our product candidates. In addition, many of the factors
that may lead to a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval
of our product candidates.
If the market opportunities for any of our
product candidates are smaller than we believe they are, our revenue may be adversely affected, and our business may suffer.
We are focused initially
on the development of treatments for cancers such as AML, MCL and CLL, and plan to eventually extend our treatments to other forms of
cancer. Our internal projections of addressable patient populations that have the potential to benefit from treatment with our product
candidates are based on estimates. If any of our estimates are inaccurate, the market opportunities for any of our product candidates
could be significantly diminished and have an adverse material impact on our business.
We currently have no marketing and sales
organization and have no experience in marketing products. If we are unable to establish marketing and sales capabilities or enter into
agreements with third parties to market and sell our product candidates, if licensed, we may not be able to generate product revenue.
We currently have no sales,
marketing or distribution capabilities and have no experience in marketing products. We intend to develop an in-house marketing organization
and sales force, which will require significant capital expenditures, management resources and time. We will have to compete with other
pharmaceutical and biotechnology companies to recruit, hire, train and retain marketing and sales personnel.
If we are unable or decide
not to establish internal sales, marketing and distribution capabilities, we will pursue collaborative arrangements regarding the sales
and marketing of our product candidates following their approval. However, there can be no assurance that we will be able to establish
or maintain such collaborative arrangements, or if we are able to do so, that they will have effective sales forces. Any revenue we receive
will depend upon the efforts of such third parties, which may not be successful. We may have little or no control over the marketing and
sales efforts of such third parties and our revenue from product sales may be lower than if we had commercialized our product candidates
ourselves. We also face competition in our search for third parties to assist us with the sales and marketing efforts of our product candidates.
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There can be no assurance
that we will be able to develop in-house sales and distribution capabilities or establish or maintain relationships with third-party collaborators
to commercialize any product in the United States or overseas.
We face competition from companies that
have developed or may develop product candidates for the treatment of the diseases that we may target, including companies developing
novel therapies and platform technologies. If these companies develop platform technologies or product candidates more rapidly than we
do, if their platform technologies or product candidates are more effective or have fewer side effects, our ability to develop and successfully
commercialize product candidates may be adversely affected.
The development and commercialization
of cell and gene therapies Is highly competitive. We compete with a variety of large pharmaceutical companies, multinational biopharmaceutical
companies, other biopharmaceutical companies and specialized biotechnology companies, as well as technology and/or therapeutics being
developed at universities and other research institutions. Our competitors are often larger and better funded than we are. Our competitors
have developed, are developing or will develop product candidates and processes competitive with ours. Competitive therapeutic treatments
include those that have already been approved and accepted by the medical community and any new treatments that are currently in development
or that enter the market. We believe that a significant number of product candidates are currently under development, and may become commercially
available in the future, for the treatment of conditions for which we may try to develop product candidates. There is intense and rapidly
evolving competition in the biotechnology and biopharmaceutical fields. We believe that while our T-cell based platform, its associated
intellectual property portfolio, the characteristics of our current and potential future product candidates and our scientific and technical
know-how together give us a competitive advantage in this space, competition from many sources remains.
Many of our competitors have
significantly greater financial, technical, manufacturing, marketing, sales and supply resources or experience than we do. If we successfully
obtain approval for any product candidate, we will face competition based on many different factors, including the safety and effectiveness
of our product candidates, the ease with which our product candidates can be administered, the timing and scope of regulatory approvals
for these product candidates, the availability and cost of manufacturing, marketing and sales capabilities, price, reimbursement coverage
and patent position. Competing products and product candidates could present superior treatment alternatives, including by being more
effective, safer, less expensive or marketed and sold more effectively than any products we may develop. Competitive products and product
candidates may make any product we develop obsolete or noncompetitive before we recover the expense of developing and commercializing
such product. Such competitors could also recruit our employees, which could negatively impact our level of expertise and our ability
to execute our business plan.
These competitors also compete
with us in recruiting and retaining qualified scientific and management personnel and establishing clinical study sites and patient registration
for clinical studies, as well as in acquiring technologies complementary to, or necessary for, our programs. Smaller or early-stage companies
may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.
Our commercial opportunity
could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less
severe side effects, are more convenient or are less expensive or better reimbursed than any products that we may commercialize. Our competitors
also may obtain FDA, EMA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could
result in our competitors establishing a strong market position for either the product or a specific indication before we are able to
enter the market.
We are highly dependent on our key personnel,
including individuals with expertise in cell therapy development and manufacturing, and if we are not successful in attracting and retaining
highly qualified personnel, we may not be able to successfully implement our business strategy.
Our ability to compete in
the highly competitive biotechnology and pharmaceutical industries depends upon our ability to attract and retain highly qualified managerial,
scientific and medical personnel. We are highly dependent on the expertise of our management, scientific and medical personnel, including
our chief executive officer ("Chief Executive Officer"), Chris Ehrlich, our chief development officer ("Chief Development
Officer"), Kristen Pierce, our chief financial officer ("Chief Financial Officer"), Al Kucharchuk and the head of our
scientific advisory board (the "Scientific Advisory Board"), Lawrence Corey. The loss of the services of any of our executive
officers, other key employees, and other scientific and medical advisors, and our inability to find suitable replacements could result
in delays in product development and harm our business.
19
We conduct substantially
all of our operations at our facilities in the South San Francisco area. The San Francisco Bay Area region is headquarters to many other
biopharmaceutical companies and many academic and research institutions. Competition for skilled personnel in our market is intense and
may limit our ability to hire and retain highly qualified personnel on acceptable terms or at all. Attrition may lead to higher costs
for hiring and retention, diversion of management time to address retention matters and disrupt the business.
To induce valuable employees
to remain at our company, in addition to salary and cash incentives, we have provided equity-based compensation for retention purposes.
Despite our efforts to retain valuable employees, members of our management, scientific and development teams may terminate their employment
with us on short notice. Although we have employment agreements with our key employees, these employment agreements provide for at-will
employment, which means that any of our employees could leave our employment at any time, with or without notice. We do not maintain "key
person" insurance policies on the lives of these individuals or the lives of any of our other employees. Our success also depends
on our ability to continue to attract, retain and motivate highly skilled junior, mid-level and senior managers as well as junior, mid-level
and senior scientific and medical personnel.
We will need to continue to grow the size
of our organization, and we may experience difficulties in managing this growth.
As our development, manufacturing
and commercialization plans and strategies develop, we expect to add managerial, operational, sales, R&D, marketing, financial and
other personnel. Current and future growth imposes and will impose significant added responsibilities on members of management, including:
●
identifying, recruiting, integrating, maintaining and motivating additional employees;
●
managing our internal development efforts effectively, including the clinical and FDA review process for our product candidates, while complying with our contractual obligations to contractors and other third parties; and
●
improving our operational, financial and management controls, reporting systems and procedures.
Our future financial performance
and our ability to commercialize our product candidates will depend, in part, on our ability to effectively manage our growth, and our
management may also have to divert a disproportionate amount of its attention away from day-to-day activities in order to devote
a substantial amount of time to managing these growth activities.
We currently rely, and for
the foreseeable future will continue to rely, in substantial part on certain independent organizations, advisors and consultants. There
can be no assurance that the services of independent organizations, advisors and consultants will continue to be available to us on a
timely basis when needed, or that we can find qualified replacements. We may also be subject to penalties or other liabilities if we mis-classify
employees as consultants. In addition, if we are unable to effectively manage our outsourced activities or if the quality or accuracy
of the services provided by consultants is compromised for any reason, our clinical trials may be extended, delayed or terminated, and
we may not be able to obtain regulatory approval of our product candidates or otherwise advance our business. There can be no assurance
that we will be able to manage our existing consultants or find other competent outside contractors and consultants on economically reasonable
terms, or at all.
If we are not able to effectively
expand our organization by hiring and retaining employees and expanding our groups of consultants and contractors, we may not be able
to successfully implement the tasks necessary to further develop, manufacture and commercialize our product candidates and, accordingly,
may not achieve our research, development, manufacturing and commercialization goals. Conversely, if we expand ahead of our business progress,
we may take on unnecessary costs.
20
We may form or seek strategic alliances
or enter into licensing arrangements in the future, and we may not realize the benefits of such alliances or licensing arrangements.
We may form or seek strategic
alliances, create joint ventures or collaborations or enter into licensing arrangements with third parties that we believe will complement
or augment our development and commercialization efforts with respect to our product candidates and any future product candidates that
we may develop. Any of these relationships may require us to incur non-recurring and other charges, increase our near and long-term expenditures,
issue securities that dilute our existing stockholders or disrupt our management and business. In addition, we face significant competition
in seeking appropriate strategic partners and the negotiation process is time-consuming and complex. Moreover, we may not be successful
in our efforts to establish a strategic partnership or other alternative arrangements for our product candidates because they may be deemed
to be at too early of a stage of development for collaborative effort and third parties may not view our product candidates as having
the requisite potential to demonstrate safety and efficacy. Any delays in entering into strategic partnership agreements related to our
product candidates could delay the development and commercialization of our product candidates in certain geographies for certain indications,
which would harm our business prospects, financial condition and results of operations.
If we license products or
new technologies or acquire businesses, we may not be able to realize the benefit of such transactions if we are unable to successfully
integrate them with our existing operations and company culture. For instance, certain of our agreements may require significant R&D
that may not result in the development and commercialization of product candidates. We cannot be certain that, following a strategic transaction
or license, we will achieve the results, revenue or specific net income that justifies such transaction.
We will need substantial additional financing
to develop our product candidates and implement our operating plans, which financing we may be unable to obtain, or unable to obtain on
acceptable terms. If we fail to obtain additional financing, we may be unable to complete the development and commercialization of our
product candidates.
We expect to spend a substantial
amount of capital in the development and manufacturing of our product candidates, and we will need substantial additional financing to
do so. In particular, we will require substantial additional financing to enable commercial production of our product candidates and initiate
and complete registrational trials for multiple products in multiple regions. Further, if approved, we will require significant additional
capital in order to launch and commercialize our product candidates.
As of September 30, 2024,
we had approximately $3.3 million in cash and cash equivalents. Changing circumstances may cause us to consume capital significantly faster
than we currently anticipate, and we may need to spend more money than currently expected because of circumstances beyond our control.
We may also need to raise additional capital sooner than we currently anticipate if we choose to expand more rapidly than we presently
plan. In any event, we will require additional capital for the further development and commercialization of our product candidates, including
funding our internal manufacturing capabilities.
We cannot be certain that
additional funding will be available on acceptable terms, or at all. We have no committed source of additional capital. If we are unable
to raise additional capital in sufficient amounts or on terms acceptable to us, we may have to significantly delay, scale back or discontinue
the development or commercialization of our product candidates or other R&D initiatives. We could be required to seek collaborators
for our product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise
be available or relinquish or license on unfavorable terms our rights to our product candidates in markets where we otherwise would seek
to pursue development or commercialization ourselves.
Any of the above events could
significantly harm our business, prospects, financial condition and results of operations and cause the price of our Common Stock to decline.
Raising additional capital may cause dilution
to our stockholders, restrict our operations or require us to relinquish rights to our product candidates.
Until such time, if ever,
as we can generate substantial revenue from the sale of our product candidates, we will need substantial additional financing to develop
our product candidates and implement our operating plans. To the extent that we raise additional capital through the sale of equity or
convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other
preferences that could adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available,
may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional
debt, making capital expenditures or declaring dividends.
21
If we raise additional funds
through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may be required
to relinquish valuable rights to our research programs or product candidates or grant licenses on terms that may not be favorable to us
or that may be at less than the full potential value of such rights. If we are unable to raise additional funds through equity or debt
financings or other arrangements with third parties when needed, we may be required to delay, limit, reduce or terminate our drug development
or future commercialization efforts or grant rights to third parties to develop and market product candidates that we would otherwise
prefer to develop and market ourselves.
The issuance of shares of our Common Stock
upon conversion or exercise of our outstanding Preferred Shares and Common Warrants and other securities that we may issue in future financing
transactions may result in substantial dilution to our stockholders.
As of the date of this prospectus,
the Company currently has outstanding (i) 2,133 shares of Series A Preferred Stock with a conversion value of approximately $2.7 million,
convertible into shares of Common Stock at a conversion rate of the stated value thereof divided by a current effective conversion price
of approximately $0.05; (ii) 486 shares of Series B Preferred Stock with a conversion value of approximately $0.6 million, convertible
into shares of Common Stock at a conversion rate of the stated value thereof divided by a current effective conversion price of approximately $0.05;
(iii) 2,853 shares of Series C Preferred Stock with a stated value of approximately $2.9 million, convertible into shares of Common Stock
at a conversion rate of the stated value thereof divided by a conversion price of $0.022; (iv) 1,563 Preferred Warrants to purchase shares
of Series A Preferred Stock at an exercise price of $1,000, which would result in Series A Preferred Stock with a conversion value of
approximately $2.0 million, convertible into shares of Common Stock at a conversion rate of the stated value thereof divided by a current
effective estimated conversion price of $0.05; (v) 612,746 Series A Warrants to purchase shares of Common Stock at an exercise price of
$1.39 per share; (vi) 8,175,166 Series C Warrants to purchase shares of Common Stock at an exercise price of $0.098; and (vii) 10,130,245
Public Warrants and Private Placement Warrants to purchase shares of Common Stock at exercise prices ranging from $9.20 to $11.50 per
share.
Although each of the conversion
price of the Preferred Shares and the exercise price of the Series A Preferred Warrants are at or above the trading price of our Common
Stock as of the date of this prospectus, if such trading price increases, such conversion prices and exercise price will not change as
a result thereof and could be below the trading price of our Common Stock as of the date of any future conversion or exercise thereof,
resulting in dilution to our stockholders. In addition, the terms of the Series A Preferred Stock, the Series B Preferred Stock and the
Series C Preferred Stock contain certain penalties and adjustments to the amount included in determination of the conversion rate following
certain breaches of the Company's obligations thereunder, including, among other things, as a result of a failure to file or cause
the SEC to declare one or more registration statements relating to the resale of the shares of Common Stock issuable upon conversion thereof
by specified deadlines, certain defaults under indebtedness of the Company or judgments against the Company and failure to deliver shares
of Common Stock upon conversion in a timely manner. For example, the penalties and adjustments include a 25% premium added to the stated
value for determining the conversion rate in connection with breaches other than the breach of the requirement to redeem the shares of
Series A Preferred Stock and Series B Preferred Stock by August 14, 2025, which results in a 50% premium, and the addition to the stated
value of an amount equal to the value of the shares of Common Stock into which the Series A Preferred Stock or Series B Preferred Stock
would have been convertible if the conversion price were equal to 80% of the lowest volume weighted average price during the five trading
days immediately prior to conversion. Such penalties and adjustments, which applied during the period when all of the conversions since
the Business Combination described in the preceding paragraph occurred as a result of a failure to file and cause the SEC to declare a
registration statement with respect to the resale of the underlying shares in a timely manner, have resulted and may in the future result
in the issuance of shares of Common Stock at an effective conversion price below the trading price of our Common Stock at the time of
such conversion.
22
We cannot assure you that
we will remain in compliance with all of the terms of the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock
and that such penalties and adjustments will not apply in the future. In addition, we cannot assure you that we will not issue additional
convertible or other derivative securities with highly dilutive penalty or adjustment provisions. As described elsewhere in this report,
the Company needs to obtain financing to fund its research and development activities and, if the IND is accepted, clinical trials, as
well as other operations. Under challenging conditions in the equity capital markets, particularly for pre-commercialization biotech companies,
we may have no viable alternatives to agreeing to inclusion of such provisions in the terms of future financings.
If our security measures, or those of our
CROs, CDMOs, collaborators, contractors, consultants or other third parties upon whom we rely, are compromised or the security, confidentiality,
integrity or availability of our information technology, software, services, networks, communications or data is compromised, limited
or fails, we could experience a material adverse impact.
In the ordinary course of
our business, we may collect, process, receive, store, use, generate, transfer, disclose, make accessible, protect, secure, dispose of,
transmit, and share (collectively processing) proprietary, confidential and sensitive information, including personal data (including
health information), intellectual property, trade secrets, and proprietary business information owned or controlled by ourselves or other
parties. We may also share or receive sensitive information with our partners, CROs, CDMOs, or other third parties. Our ability to monitor
these third parties' information security practices is limited, and these third parties may not have adequate information security
measures in place. If we (or a third party upon whom we rely) experience a security incident or are perceived to have experienced a security
incident, we may also experience adverse consequences.
Our internal computer systems
and those of our CROs, CDMOs, collaborators, contractors, consultants or other third parties are vulnerable to damage from computer viruses,
unauthorized access, cybersecurity threats, and telecommunication and electrical failures. In addition, as many of our personnel work
from home at least part of the time and utilize network connections outside our premises, this poses increased risks to our information
technology systems and data. Cyberattacks, malicious internet-based activity, and online and offline fraud are prevalent and are increasing
in their frequency, sophistication and intensity, and have become increasingly difficult to detect. These threats come from a variety
of sources, including traditional computer "hackers," "hacktivists," organized criminal threat actors, threat
actors, personnel (such as through theft or misuse), sophisticated nation-states, and nation-state-supported actors. Some actors now engage
and are expected to continue to engage in cyber-attacks, including without limitation nation-state actors for geopolitical reasons and
in conjunction with military conflicts and defense activities. During times of war and other major conflicts, we, and the third parties
upon which we rely, may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially
disrupt our systems and operations, supply chain, and ability to produce and distribute our product candidates. We and the third parties
upon which we rely are subject to a variety of evolving threats, including social-engineering attacks (including through phishing attacks),
malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service
(such as credential stuffing), credential harvesting, social engineering attacks (including through phishing attacks), viruses, ransomware,
supply chain attacks, personnel misconduct or error and other similar threats. We may also be the subject of software bugs, server malfunction,
software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures or other similar
issues. In particular, ransomware attacks are becoming increasingly prevalent and severe and can lead to significant interruptions, delays,
or outages in our operations, disruptions to our clinical trials, loss of data (including data related to clinical trials), significant
expense to restore data or systems, reputational loss and the diversion of funds. Extortion payments may alleviate the negative impact
of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting
such payments. Similarly, supply chain attacks have increased in frequency and severity, and we cannot guarantee that third parties and
infrastructure in our supply chain have not been compromised or that they do not contain exploitable defects or bugs that could result
in a breach to our information technology systems or the third-party information technology systems that support us and our services.
Future or past business transactions (such as acquisitions or integrations) could expose us to additional cybersecurity risks and vulnerabilities,
as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities' systems and technologies.
Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it
may be difficult to integrate companies into our information technology environment and security program.
23
Any of the previously identified
or similar threats could cause a security incident or other interruption. A security incident or other interruption could result in unauthorized,
unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to our sensitive
information. A security incident or other interruption could disrupt our ability (and that of third parties upon whom we rely) to manufacture
or deliver our product candidates.
We may expend significant
resources, or modify our business activities and operations, including our clinical trial activities, in an effort to protect against
security incidents. Certain data privacy and security obligations may require us to implement and maintain specific security measures
or use industry-standard or reasonable security measures to protect our information technology systems and sensitive information.
Although we have implemented
security measures designed to protect against security incidents, there can be no assurance that these measures will be effective. We
have experienced attempts to compromise our information technology systems or otherwise cause a security incident, but, to our knowledge,
such attempts have been unsuccessful. In addition, from time to time, our vendors inform us of security incidents. To date, our review
of such incidents as reported to us did not reveal material information being lost, CERo-specific security vulnerabilities or provide
any useful information or insight into our systems or environment. However, we may not have all information related to such incidents
and future incidents could have an adverse impact on our business.
We may be unable to detect
vulnerabilities in our information technology systems because such threats and techniques change frequently, are often sophisticated in
nature, and may not be detected until after a security incident has occurred. Despite our efforts to identify and remediate exploitable
critical vulnerabilities, if any, in our information technology systems, our efforts may not be successful. Further, we may experience
delays in developing and deploying remedial measures designed to address any such identified vulnerabilities. Any failure to prevent or
mitigate security incidents or improper access to, use of, or disclosure of our clinical data or patients' personal data could result
in significant liability under state, federal, and international law and may cause a material adverse impact to our reputation, affect
our ability to conduct our clinical trials and potentially disrupt our business.
Applicable data protection
laws, privacy policies and data protection obligations may require us to notify relevant stakeholders of security incidents. Such disclosures
are costly, and the disclosures or the failure to comply with such requirements could lead to adverse consequences. If we (or a third
party upon whom we rely) experience a security incident or are perceived to have experienced a security incident, we may also experience
adverse consequences. These consequences may include: government enforcement actions (for example, investigations, fines, penalties, audits,
and inspections); additional reporting requirements and/or oversight; restrictions on processing sensitive information (including personal
data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions;
interruptions in our operations (including availability of data); financial loss; and other similar harms.
Our contracts may not contain
limitations of liability, and even where they do, there can be no assurance that the limitations of liability in our contracts are sufficient
to protect us from liabilities, damages, or claims related to our data privacy and security obligations.
We cannot be sure that our
insurance coverage will be adequate or sufficient to protect us from or adequately mitigate liabilities arising out of our privacy and
security practices, or that such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage
will pay future claims.
Disruptions at the FDA, the SEC and other
government agencies caused by funding shortages or global health concerns could hinder their ability to hire and retain key leadership
and other personnel, prevent new products and services from being developed or commercialized in a timely manner or otherwise prevent
those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact
our business.
The ability of the FDA to
review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire
and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times at the
agency have fluctuated in recent years as a result. In addition, government funding of the SEC and other government agencies on which
our operations may rely, including those that fund R&D activities is subject to the political process, which is inherently fluid and
unpredictable.
24
Disruptions at the FDA and
other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would
adversely affect our business. For example, over the last several years the U.S. government has shut down several times and
certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC and other government employees and stop
critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review
and process our regulatory submissions, which could have a material adverse effect on our business. Further, in our operations as a public
company, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly
capitalize and continue our operations.
Since March 2020, when
foreign and domestic inspections of facilities were largely placed on hold, the FDA has been working to resume pre-pandemic levels of
inspection activities, including routine surveillance, bioresearch monitoring and pre-approval inspections. Should the FDA determine that
an inspection is necessary for approval and an inspection cannot be completed during the review cycle due to restrictions on travel or
otherwise, and the FDA does not determine a remote interactive evaluation to be adequate, the FDA has stated that it generally intends
to issue, depending on the circumstances, a complete response letter or defer action on the application until an inspection can be completed.
Business disruptions, including financial
institution distress, could seriously harm our future revenue and financial condition and increase our costs and expenses.
Our operations, and those
of our CROs, CDMOs and other contractors and consultants, could be subject to earthquakes, power shortages, telecommunications failures,
water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical pandemics or epidemics and other natural or
man-made disasters or business interruptions. The occurrence of any of these business disruptions could seriously harm our operations
and financial condition and increase our costs and expenses. Our ability to obtain clinical supplies of our product candidates could be
disrupted if the operations of these suppliers are affected by a man-made or natural disaster or other business interruption.
Our employees, independent contractors,
consultants, commercial partners and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory
standards and requirements.
We are exposed to the risk
of employee fraud or other illegal activity by our employees, independent contractors, consultants, commercial partners and vendors. Misconduct
by these parties could include intentional, reckless and/or negligent conduct that fails to comply with the regulations of the FDA and
other similar foreign regulatory authorities, provide true, complete and accurate information to the FDA and other similar foreign regulatory
authorities, comply with manufacturing standards we have established, comply with healthcare fraud and abuse laws in the United States
and similar foreign fraudulent misconduct laws or report financial information or data accurately or to disclose unauthorized activities
to us. If we obtain FDA approval of any of our product candidates and begin commercializing those products in the United States, our potential
exposure under such laws and regulations will increase significantly, and our costs associated with compliance with such laws and regulations
are also likely to increase. These laws may impact, among other things, our current activities with principal investigators and research
patients, as well as proposed and future sales, marketing and education programs. In particular, the promotion, sales and marketing of
healthcare items and services, as well as certain business arrangements in the healthcare industry, are subject to extensive laws designed
to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range
of pricing, discounting, marketing and promotion, structuring and commission(s), certain customer incentive programs and other business
arrangements generally. For more information, see the section entitled "
Business– Healthcare Laws and Regulations.
"
The distribution of biotechnology
and biopharmaceutical products is subject to additional requirements and regulations, including extensive record-keeping, licensing, storage
and security requirements intended to prevent the unauthorized sale of biotechnology and biopharmaceutical products.
25
The scope and enforcement
of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of
the lack of applicable precedent and regulations. Ensuring business arrangements comply with applicable healthcare laws, as well as responding
to possible investigations by government authorities, can be time- and resource-consuming and can divert a company's attention from
other aspects of its business.
It is not always possible
to identify and deter employee misconduct, and our code of ethics and the other precautions we take to detect and prevent inappropriate
conduct may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations
or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations.
Efforts to ensure that our
business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs. Because
of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our
business activities could be subject to challenge under one or more of such laws. It is possible that governmental authorities will conclude
that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse
or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental
regulations that may apply to us, we may be subject to significant criminal, civil and administrative sanctions including monetary penalties,
damages, fines, disgorgement, diminished profits and future earnings, individual imprisonment, and exclusion from participation in government
funded healthcare programs, such as Medicare and Medicaid, additional reporting requirements and oversight if we become subject to a corporate
integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, reputational harm, and we may be required
to curtail or restructure our operations, any of which could adversely affect our ability to operate our business and our results of operations.
The shifting compliance environment
and the need to build and maintain robust and expandable systems to comply with multiple jurisdictions with different compliance and/or
reporting requirements increases the possibility that a healthcare company may run afoul of one or more of the requirements. Any action
against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses
and divert our management's attention from the operation of our business.
The provision of benefits
or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or use of medicinal
products is also prohibited in the European Union. The provision of benefits or advantages to induce or reward improper performance
generally is typically governed by the national anti-bribery laws of European Union Member States, and in respect of the U.K. (which is
longer a member of the European Union), the U.K. Bribery Act 2010. Infringement of these laws could result in substantial fines
and imprisonment. European Union Directive 2001/83/EC, which is the European Union Directive governing medicinal products for human use,
further provides that, where medicinal products are being promoted to persons qualified to prescribe or supply them, no gifts, pecuniary
advantages or benefits in kind may be supplied, offered or promised to such persons unless they are inexpensive and relevant to the practice
of medicine or pharmacy. This provision has been transposed into the Human Medicines Regulations 2012 and so remains applicable in the
UK despite its departure from the European Union. Payments made to physicians in certain European Union Member States must be publicly
disclosed. Moreover, agreements with physicians often must be the subject of prior notification and approval by the physician's
employer, his or her competent professional organization and/or the regulatory authorities of the individual European Union Member States.
These requirements are provided in the national laws, industry codes or professional codes of conduct, applicable in the European Union
Member States. Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties,
fines or imprisonment.
The collection, use, disclosure,
transfer, or other processing of personal data regarding individuals in the European Union, including personal health data, is subject
to the European Union General Data Protection Regulation ("GDPR"), which became effective on May 25, 2018, as well as
the United Kingdom's General Data Protection Regulations (the "UK GDPR"), which, together with the amended UK Data Protection
Act 2018, retains the GDPR in UK national law. The GDPR is wide-ranging in scope and imposes numerous requirements on companies that
process personal data, including requirements relating to processing health and other sensitive data, obtaining consent of the individuals
to whom the personal data relates, providing information to individuals regarding data processing activities, implementing safeguards
to protect the security and confidentiality of personal data, providing notification of data breaches, and taking certain measures when
engaging third-party processors. The GDPR also imposes strict rules on the transfer of personal data to countries outside the European
Union, including the United States, and permits data protection authorities to impose large penalties for violations of the GDPR,
including potential fines of up to €20 million or 4% of annual global revenues, whichever is greater; UK GDPR mirrors such fines
under the GDPR. The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with
supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR. Compliance
with the GDPR will be a rigorous and time-intensive process that may increase our cost of doing business or require us to change our business
practices, and despite those efforts, there is a risk that we may be subject to fines and penalties, litigation, and reputational harm
in connection with European activities. This and other future developments regarding the flow of data across borders could increase the
cost and complexity of delivering our product candidates, if approved, in some markets and may lead to governmental enforcement actions,
litigation, fines and penalties or adverse publicity, which could have an adverse effect on our reputation and business.
26
Our product candidates may cause undesirable
side effects or have other properties that could halt their clinical development, prevent their regulatory approval, limit their commercial
potential or result in significant negative consequences.
Future undesirable or unacceptable
side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and
could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign regulatory
authorities. Results of our clinical trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected
characteristics. Approved autologous T cell therapies and those under development by other companies have shown frequent rates of CRS,
neurotoxicity, serious infections, prolonged cytopenia and hypogammaglobulinemia, and adverse events have resulted in the death of patients.
Similar adverse events may occur for our T cell product candidates.
In addition, we utilize a
lymphodepletion regimen, which generally includes fludarabine, cyclophosphamide or bendamustine, that may cause serious adverse events.
For instance, because the regimen will cause a transient and sometimes prolonged immune suppression, patients will have an increased risk
of infection, such as to COVID-19, that may be unable to be cleared by the patient and ultimately lead to other serious adverse events
or death. Our lymphodepletion regimen has caused and may also cause prolonged cytopenia and aplastic anemia.
We may also combine the use
of our product candidates with other investigational or approved therapies that may cause separate adverse events or events related to
the combination or potentiate side effects of approved drugs.
If unacceptable toxicities
arise in the development of our product candidates, we could suspend or terminate our trials or the FDA, the EMA or comparable foreign
regulatory authorities could order us to cease clinical trials or deny approval of our product candidates for any or all targeted indications.
Any data safety monitoring board may also suspend or terminate a clinical trial at any time on various grounds, including a finding that
the research patients are being exposed to an unacceptable health risk, including risks inferred from other unrelated immunotherapy trials.
Treatment-related side effects could also affect patient recruitment or the ability of enrolled subjects to complete the trial or result
in potential product liability claims. In addition, these side effects may not be appropriately recognized or managed by the treating
medical staff, as toxicities resulting from T cell therapy are not normally encountered in the general patient population and by medical
personnel. Inadequate training in recognizing or managing the potential side effects of our product candidates could result in patient
deaths. Any of these occurrences may harm our business, financial condition and prospects significantly.
Our product candidates may target healthy
cells expressing target antigens, leading to potentially fatal adverse effects.
Our product candidates target
specific antigens that are also expressed on healthy cells. For example, cell surface phosphatidylserine, the target of CER-1236, has
been observed on activated immune cells, including platelets, and in rapidly dividing cells across various organs including the gastrointestinal
system, hepatic system, cardiovascular system, renal system, pulmonary system, and the central nervous system and related peripheral nervous
system. Our product candidates may target healthy cells, leading to serious and potentially fatal adverse effects. Even though we intend
to closely monitor the side effects of our product candidates in both preclinical studies and clinical trials, we cannot guarantee that
products will not target and kill healthy cells.
27
Our product candidates may have serious
and potentially fatal cross-reactivity to lipids, peptides or protein sequences within the body.
Our product candidates may
recognize and bind to a peptide unrelated to the target antigen to which it is designed to bind. If this peptide is expressed within normal
tissues, our product candidates may target and kill the normal tissue in a patient, leading to serious and potentially fatal adverse effects.
Additionally, our product candidates may bind with non-targeted lipids, leading to off-target reactivity. Detection of any on-target off-tumor
or non-specific-reactivity may halt or delay any ongoing clinical trials for any CER-T cell based product candidate and prevent or delay
regulatory approval. Unknown binding-reactivity of the CER-T cell binding domain to related proteins could also occur. Any non-specific
binding interactions that impacts patient safety could materially impact our ability to advance our product candidates into clinical trials
or to proceed to marketing approval and commercialization.
If product liability lawsuits are brought
against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.
We face an inherent risk
of product liability as a result of the planned clinical testing of our product candidates and will face an even greater risk if we commercialize
any products. For example, we may be sued if our product candidates cause or are perceived to cause injury or are found to be otherwise
unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects
in manufacturing, defects in design, packaging, a failure to warn of dangers inherent in the product, negligence, strict liability or
a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves
against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates.
Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability
claims may result in:
●
decreased demand for our product candidates or products that we may develop;
●
injury to our reputation;
●
withdrawal of clinical trial participants;
●
initiation of investigations by regulators;
●
costs to defend the related litigation;
●
a diversion of management's time and our resources;
●
substantial monetary awards to trial participants or patients;
●
product recalls, withdrawals or labeling, marketing or promotional restrictions;
●
loss of revenue;
●
exhaustion of any available insurance and our capital resources;
●
the inability to commercialize any product candidate; and
●
a decline in our stock price.
Failure to obtain or retain
sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit
the commercialization of products we develop, alone or with corporate collaborators. Although we plan on purchasing clinical trial insurance,
such insurance policies also have various exclusions, and we may be subject to a product liability claim for which we have no coverage.
We may have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered
by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts. Even if our agreements with any future
corporate collaborators entitle us to indemnification against losses, such indemnification may not be available or adequate should any
claim arise.
28
Public opinion and scrutiny of cell-based
immune-oncology therapies for treating cancer, or negative clinical trial results from our cell-based therapy competitors, or auto-immune
cell therapy candidates, may impact public perception of our company and product candidates, or impair our ability to conduct our business.
Our autologous cell therapy
platforms utilizes a relatively novel technology involving the genetic modification of cells, and no CER-T cell-based immunotherapy has
been approved to date. Public perception may be influenced by claims, such as claims that cell-based immunotherapy is unsafe, unethical,
or immoral and, consequently, our approach may not gain the acceptance of the public or the medical community. Negative public reaction
to cell-based immunotherapy in general, or negative clinical trial results from our cell-based therapy competitors, or auto-immune cell
therapy candidates, could result in greater government regulation and stricter labeling requirements of cell-based immunotherapy products,
including any of our product candidates, and could cause a decrease in the demand for any products we may develop. Adverse public attitudes
may adversely impact our ability to enroll patients in clinical trials. More restrictive government regulations or negative public opinion
could have an adverse effect on our business or financial condition and may delay or impair the development and commercialization of our
product candidates or demand for any products we may develop.
For example, in November
2023, the FDA announced that it would be conducting an investigation into reports of T-cell malignancies following BCMA-directed or CD19-directed
autologous CAR-T cell immunotherapies following reports of T cell lymphoma in patients receiving these therapies. In January 2024, the
FDA determined that new safety information related to T cell malignancies should be included in the labeling with boxed warning language
on these malignancies for all BCMA- and CD-19-directed genetically modified autologous T cell immunotherapies. While CER-1236
and our engineered CER-T cells are designed to utilize a different mechanism of action, FDA's investigation into CAR-T
therapies and other similar actions could result in increased government regulation, unfavorable public perception and publicity, potential
impacts on enrollment in our clinical trials, potential regulatory delays in the testing or approval of our product candidates, stricter
labeling requirements for those product candidates that are approved, and a decrease in demand for any such product candidates.
Our product candidates for which we intend
to seek approval as biological products may face competition sooner than anticipated, including from other therapeutic modalities.
The Affordable Care Act,
signed into law on March 23, 2010, includes a subtitle called the BPCIA, which created an abbreviated approval pathway for biological
products that are biosimilar to or interchangeable with an FDA-licensed reference biological product. Under the BPCIA, an application
for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first
licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from
the date on which the reference product was first licensed. During this 12-year period of exclusivity, another company may still market
a competing version of the reference product if the FDA approves a full BLA for the competing product containing the sponsor's own
preclinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of their product.
We believe that any of our
product candidates approved as a biological product under a BLA should qualify for the 12-year period of exclusivity. However, there is
a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider our product
candidates to be reference products for competing products, potentially creating the opportunity for generic competition sooner than anticipated.
Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation.
Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of our products in a way that is similar to
traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory
factors that are still developing.
If any approved products
are subject to biosimilar competition sooner than we expect, we will face significant pricing pressure and our commercial opportunity
will be limited.
29
The insurance coverage and reimbursement
status of newly-approved products is uncertain. Failure to obtain or maintain adequate coverage and reimbursement for new products could
limit our product revenues.
Our ability to commercialize
any of our product candidates successfully will depend in part on the extent to which reimbursement for these products and related treatments
will be available from government health administration authorities, private health insurers, and other organizations. In the United States,
the principal decisions about reimbursement for new therapies are typically made by CMS, an agency within the United States Department
of Health and Human Services. CMS decides whether and to what extent a new therapy will be covered and reimbursed under Medicare, and
private payors tend to follow CMS determinations to a substantial degree. The availability and extent of reimbursement by governmental
and private payors is essential for most patients to be able to afford expensive treatments, such as cellular immunotherapy. There is
significant uncertainty related to the insurance coverage and reimbursement of newly approved products by government and third-party payors.
In particular, there is no body of established practices and precedents for reimbursement of cellular immunotherapies, and it is difficult
to predict what the regulatory authority or private payor will decide with respect to reimbursement levels for novel products such as
ours. Our product candidates may not qualify for coverage or direct reimbursement, or may be subject to limited reimbursement. If reimbursement
or insurance coverage is not available, or is available only to limited levels, we may not be able to successfully commercialize our product
candidates, if approved. Even if coverage is provided, the approved reimbursement amount may not be sufficient to allow us to establish
or maintain pricing to generate income.
In addition, reimbursement
agencies in foreign jurisdictions may be more conservative than those in the United States. Accordingly, in markets outside the United States,
the reimbursement for our product candidates, if approved, may be reduced as compared with the United States and may be insufficient
to generate commercially reasonable revenues and profits. Moreover, increasing efforts by governmental and third-party payors, in the
United States and abroad, to cap or reduce healthcare costs may cause such organizations to limit both coverage and level of reimbursement
for new products approved, and as a result, they may not cover or provide adequate payment for our product candidates. Failure to obtain
or maintain adequate reimbursement for any products for which we receive marketing approval will adversely affect our ability to achieve
commercial success, and could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize
products, and our overall financial condition.
Even if we obtain regulatory and marketing
approval for a product candidate, our product candidates will remain subject to regulatory oversight.
Even if we receive marketing
and regulatory approval for CER-1236 or any other product candidates, regulatory authorities may still impose significant restrictions
on the indicated uses or marketing or impose ongoing requirements for potentially costly post-approval studies. CER-1236 and other product
candidates will also be subject to ongoing regulatory requirements for manufacturing, labeling, packaging, storage, advertising, promotion,
sampling, record-keeping, and submission of safety and other post-market information. The FDA has significant post-market authority, including,
for example, the authority to require labeling changes based on new safety information and to require post-market studies or clinical
trials to evaluate serious safety risks related to the use of a biologic. Any regulatory approvals that we receive for CER-1236 or other
product candidates may also be subject to a REMS, limitations on the approved indicated uses for which the product may be marketed or
to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including post-approval clinical
trials, and surveillance to monitor the quality, safety, and efficacy of the product, all of which could lead to lower sales volume and
revenue. For example, the holder of an approved BLA is obligated to monitor and report adverse events and any failure of a product to
meet the specifications in the BLA. The holder of an approved BLA also must submit new or supplemental applications and obtain FDA
approval for certain changes to the approved product, product labeling, or manufacturing process. Advertising and promotional materials
must comply with FDA rules and are subject to FDA review, in addition to other potentially applicable federal and state laws.
In addition, product manufacturers
and their facilities are subject to payment of user fees and continual review and periodic inspections by the FDA and other regulatory
authorities for compliance with cGMP requirements and adherence to commitments made in the BLA or foreign marketing application. If we,
or a regulatory authority, discover(s) previously unknown problems with a product, such as adverse events of unanticipated severity
or frequency, or problems with the facility where the product is manufactured or disagrees with the promotion, marketing or labeling of
that product, a regulatory authority may impose restrictions relative to that product, the manufacturing facility or us, including requiring
recall or withdrawal of the product from the market or suspension of manufacturing.
30
If we or our contractors
fail to comply with applicable regulatory requirements following approval of CER-1236 or our other product candidates, a regulatory authority
may:
●
issue a warning letter, untitled letter, or Form 483, asserting that we are in violation of the law;
●
request voluntary product recalls;
●
seek an injunction or impose administrative, civil, or criminal penalties or monetary fines;
●
suspend or withdraw regulatory approval;
●
suspend any ongoing clinical trials;
●
refuse to approve a pending BLA or comparable foreign marketing application (or any supplements thereto);
●
restrict the marketing or manufacturing of the product;
●
seize or detain the product or otherwise require the withdrawal of the product from the market;
●
refuse to permit the import or export of product candidates; or
●
refuse to allow us to enter into supply contracts, including government contracts.
Any government investigation
of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity.
The occurrence of any event or penalty described above may inhibit our ability to commercialize CER-1236 or other product candidates and
adversely affect our business, financial condition, results of operations, and prospects.
Prior treatments can alter the cancer or
target of CER-T cell therapy and negatively impact chances for achieving clinical activity with our programmed T cells.
Patients with hematological
cancers receive highly toxic lympho-depleting chemotherapy as their initial treatment. These therapies can impact the viability of the
T cells collected from the patient and can contribute to highly variable responses to programmed T cell therapies. Patients could also
have received prior therapies that target the same target antigen on the cancer cells as our intended programmed T cell product candidate
and thereby lead to a selection of cancer cells with low or no expression of the target. Cancers also naturally evolve and select clones
with low or no expression of the target. As a result, our programmed T cell product candidates may not recognize the cancer cell and may
fail to achieve clinical activity. If any of our product candidates do not achieve a sufficient level of clinical activity, we may discontinue
the development of that product candidate, which could adversely affect our business, financial condition, results of operations, and
prospects.
31
Risks Related to Reliance on Third-Parties
We will rely on third parties to conduct
our clinical trials. If these third parties do not properly and successfully carry out their contractual duties or meet expected deadlines,
we may not be able to obtain regulatory approval of or commercialize our product candidates.
We expect to utilize and
depend upon independent investigators and collaborators, such as medical institutions, CROs, CDMOs and strategic partners to conduct our
preclinical studies under agreements with us and in connection with our clinical trials. We expect to have to negotiate budgets and contracts
with CROs, trial sites and CDMOs which may result in delays to our development timelines and increased costs. We will rely heavily on
these third parties over the course of our clinical trials and we control only certain aspects of their activities. As a result, we have
less direct control over the conduct, timing and completion of these clinical trials and the management of data developed through clinical
trials than would be the case if we were relying entirely upon our own staff. Nevertheless, we are responsible for ensuring that each
of our studies is conducted in accordance with applicable protocol, legal and regulatory requirements and scientific standards and our
reliance on third parties does not relieve us of our regulatory responsibilities. We and these third parties are required to comply with
GCPs, which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities for product candidates in
clinical development. Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators
and trial sites. If we or any of these third parties fail to comply with applicable GCP regulations, the clinical data generated in our
clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional
clinical trials before approving our marketing applications. We cannot assure you that, upon inspection, such regulatory authorities will
determine that any of our clinical trials comply with the GCP regulations. In addition, our clinical trials must be conducted with biological
product produced under cGMP regulations, including current good tissue practice ("cGTP") regulations, and will require a large
number of test patients. Our failure or any failure by these third parties to comply with these regulations or to recruit a sufficient
number of patients may require us to repeat clinical trials, which would delay the regulatory approval process. Moreover, our business
may be implicated if any of these third parties violates federal or state fraud and abuse or false claims laws and regulations or healthcare
privacy and security laws.
Any third parties conducting
our clinical trials are not and will not be our employees and, except for remedies available to us under our agreements with such third
parties, we cannot control whether or not they devote sufficient time and resources to our product candidates. These third parties may
also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical trials
or other drug development activities, which could affect their performance on our behalf. If these third parties do not successfully carry
out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the
clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other
reasons, our clinical trials may be extended, delayed or terminated and we may not be able to complete development of, obtain regulatory
approval of or successfully commercialize our product candidates. As a result, our financial results and the commercial prospects for
our product candidates would be harmed, our costs could increase and our ability to generate revenue could be delayed.
Switching or adding third
parties to conduct our clinical trials involves substantial cost and requires extensive management time and focus. In addition, changes
in manufacturers often involve changes in manufacturing procedures and processes, which could require that we conduct bridging studies
between our prior clinical supply used in our clinical trials and that of any new manufacturer. We may be unsuccessful in demonstrating
the comparability of clinical supplies which could require the conduct of additional clinical trials. Additionally, there is a natural
transition period when a new third party commences work. As a result, delays occur, which can materially impact our ability to meet our
desired clinical development timelines.
We rely on third parties to manufacture
and store our clinical product supplies, and we may have to rely on third parties to produce and process our product candidates, if approved.
There can be no assurance that we will be able to establish or maintain relationships with such third parties. We may in the future establish
our own manufacturing facility and infrastructure in addition to or in lieu of relying on third parties for the manufacture of our product
candidates, which would be costly, time-consuming and which may not be successful.
Our product candidates are
manufactured in the United States by third parties, and we manage all other aspects of the supply, including planning, oversight,
disposition and distribution logistics. There can be no assurance that we will not experience supply or manufacturing issues in the future.
We have a long-term agreement
in place with a CDMO for the manufacture of CER-1236. However, we have not yet caused our product candidates to be manufactured or processed
on a commercial scale and may not be able to achieve manufacturing and processing and may be unable to create an inventory of mass-produced
product to satisfy demands for any of our product candidates. Our clinical supply will also be limited to small quantities and any latent
defects discovered in our supply could significantly delay our development timelines.
32
In addition, our actual and
potential future reliance on a limited number of third-party manufacturers exposes us to the following risks:
●
We may be unable to identify manufacturers on acceptable terms or at all because the number of potential manufacturers is limited and the FDA may have questions regarding any replacement contractor. This may require new testing and regulatory interactions. In addition, a new manufacturer would have to be educated in, or develop substantially equivalent processes for, production of our products after receipt of FDA questions, if any.
●
Our third-party manufacturers might be unable to timely formulate and manufacture our product or produce the quantity and quality required to meet our clinical and commercial needs, if any.
●
Contract manufacturers may not be able to execute our manufacturing procedures appropriately.
●
Manufacturers are subject to ongoing periodic unannounced inspection by the FDA, the Drug Enforcement Administration and corresponding state agencies to ensure strict compliance with cGMP and other government regulations and corresponding foreign standards. We do not have control over third-party manufacturers' compliance with these regulations and standards.
●
We may not own, or may have to share, the intellectual property rights to any improvements made by our third-party manufacturers in the manufacturing process for our products.
●
Our future contract manufacturers may not perform as agreed or may not remain in the contract manufacturing business for the time required to supply our clinical trials or to successfully produce, store and distribute our products.
●
Our third-party manufacturers could breach or terminate their agreement with us.
Our contract manufacturers
would also be subject to the same risks we face in developing our own manufacturing capabilities, as described above. Our current and
potential future CDMOs may also be required to shut down in response to the spread of health epidemics or pandemics, or they may prioritize
manufacturing for therapies or vaccines for other diseases. In addition, our CDMOs have certain responsibilities for storage of raw materials
and in the past have lost or failed to adequately store our raw materials. We will also rely on third parties to store our released product
candidates, and any failure to adequately store our product candidates could result in significant delay to our development timelines.
Any additional or future damage or loss of raw materials or product candidates could materially impact our ability to manufacture and
supply our product candidates. Each of these risks could delay our clinical trials, the approval, if any of our product candidates by
the FDA or the commercialization of our product candidates or result in higher costs or deprive us of potential product revenue.
In addition, we will rely
on third parties to perform release tests on our product candidates prior to delivery to patients. If these tests are not appropriately
done and test data are not reliable, patients could be put at risk of serious harm.
We maintain single supply relationships
for certain key components, and our business and operating results could be harmed if supply is restricted or ends or the price of raw
materials used in our suppliers' manufacturing process increases.
We are dependent on sole
suppliers or a limited number of suppliers for certain components that are integral to our product candidates, including CER-1236. If
these or other suppliers encounter financial, operating or other difficulties or if our relationship with them changes, we may be unable
to quickly establish or qualify replacement sources of supply and could face production interruptions, delays and inefficiencies. In addition,
technology changes by our vendors could disrupt access to required manufacturing capacity or require expensive, time-consuming development
efforts to adapt and integrate new equipment or processes. Our growth may exceed the capacity of one or more of these suppliers to produce
the needed equipment and materials in sufficient quantities to support our growth. Any one of these factors could harm our business and
growth prospects.
33
Our product candidates rely on the availability
of specialty raw materials, which may not be available to us on acceptable terms or at all.
Our product candidates, including
CER-1236, require many specialty raw materials, some of which are manufactured by small companies with limited resources and experience
to support a commercial product. In addition, those suppliers normally support blood-based hospital businesses and generally do not have
the capacity to support commercial products manufactured under cGMP by biopharmaceutical firms. The suppliers may be ill-equipped to support
our needs, especially in non-routine circumstances like an FDA inspection or medical crisis, such as widespread contamination. We also
do not have contracts with many of these suppliers and may not be able to contract with them on acceptable terms or at all. Accordingly,
we may experience delays in receiving key raw materials to support clinical or commercial manufacturing.
In addition, some of our
raw materials are currently available from a single supplier, or a small number of suppliers. For example, the type of cell culture media
and cryopreservation buffer that we currently use in our manufacturing process for the CER-T cells are available from multiple suppliers,
but each version may perform differently, requiring us to characterize them and modify our protocols if we change suppliers. Disruption
of our cell manufacturing process may affect product health, fitness, and potentially anti-tumor activity and clinical responses. In addition,
the cell processing equipment and tubing that we use in our current manufacturing process is only available from a single supplier. We
also use certain biologic materials, including certain activating antibodies, that are available from multiple suppliers, but each version
may perform differently, requiring us to characterize them and potentially modify some of our protocols if we change suppliers. We cannot
be sure that these suppliers will remain in business, or that they will not be purchased by one of our competitors or another company
that is not interested in continuing to produce these materials for our intended purpose. If we are required to change suppliers, the
materials may only be available from another supplier on terms that are less favorable to us than the terms under which we currently obtain
the materials. Accordingly, if we no longer have access to these suppliers, we may experience delays in our clinical or commercial manufacturing
which could harm our business or results of operations.
If we or our third-party suppliers use hazardous,
non-hazardous, biological or other materials in a manner that causes injury or violates applicable law, we may be liable for damages.
Our R&D activities involve
the controlled use of potentially hazardous substances, including chemical and biological materials. We and our suppliers are subject
to federal, state and local laws and regulations in the United States governing the use, manufacture, storage, handling and disposal
of medical and hazardous materials. Although we believe that we and our suppliers' procedures for using, handling, storing and disposing
of these materials comply with legally prescribed standards, we and our suppliers cannot completely eliminate the risk of contamination
or injury resulting from medical or hazardous materials. As a result of any such contamination or injury, we may incur liability or local,
city, state or federal authorities may curtail the use of these materials and interrupt our business operations. In the event of an accident,
we could be held liable for damages or penalized with fines, and the liability could exceed our resources. We do not have any insurance
for liabilities arising from medical or hazardous materials. In addition, any violation in the use, manufacture, storage, handling and
disposal under foreign law may subject us to additional liability.
Compliance with applicable
environmental laws and regulations is expensive, and current or future environmental regulations may impair our research, development
and production efforts, which could harm our business, prospects, financial condition or results of operations.
Risks Related to Government and Regulation
Clinical development and the regulatory
approval process involve a lengthy and expensive process with an uncertain outcome and results of earlier studies and preclinical data,
and trials may not be predictive of future clinical trial results. If our preclinical studies and clinical trials are not sufficient to
support regulatory approval of any of our product candidates, we may incur additional costs or experience delays in completing, or ultimately
be unable to complete, the development of such product candidate.
The research, testing, manufacturing,
labeling, licensure, sale, marketing and distribution of biological products are subject to extensive regulation by the FDA and other
regulatory authorities in the United States and other countries, and such regulations differ from country to country. We are not
permitted to market our product candidates in the United States or in any foreign countries until they receive the requisite licensure
from the applicable regulatory authorities of such jurisdictions. We have not previously submitted a BLA to the FDA or similar licensure
applications to comparable foreign regulatory authorities. A BLA must include extensive preclinical and clinical data and supporting information
to establish the product candidate's safety, purity and potency for each desired indication. The BLA must also include significant
information regarding the manufacturing controls for the product. We expect the novel nature of our product candidates to create further
challenges in obtaining regulatory approval. Accordingly, the regulatory approval pathway for our product candidates may be uncertain,
complex, expensive and lengthy, and licensure may not be obtained.
34
We cannot be certain that
our preclinical studies and clinical trial results will be sufficient to support regulatory approval of our product candidates. Clinical
testing is expensive and can take many years to complete and its outcome is inherently uncertain. Human clinical trials are expensive
and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. Failure or delay can occur
at any time during the clinical trial process.
We may experience delays
in obtaining the FDA's authorization to initiate clinical trials under future INDs and completing ongoing clinical studies of our
product candidates due to a variety of factors. Additionally, we cannot be certain that preclinical studies or clinical trials for our
product candidates will begin on time, not require redesign, enroll an adequate number of subjects on time, or be completed on schedule,
if at all. Clinical trials can be delayed or terminated for a variety of reasons, including delays or failures related to:
●
the availability of financial resources to commence and complete the planned trials
●
the FDA or comparable foreign regulatory authorities disagreeing as to the design or implementation of our clinical trials;
●
delays in obtaining regulatory approval to commence a clinical trial;
●
our inability to demonstrate to the satisfaction of the FDA or the applicable foreign regulatory authority that any of our product candidates are safe, potent and pure;
●
the FDA's or the applicable foreign regulatory agency's disagreement with our trial protocol or the interpretation of data from preclinical studies or clinical trials;
●
our inability to demonstrate that the clinical and other benefits of any of our product candidates outweigh any safety or other perceived risks;
●
the FDA's or the applicable foreign regulatory agency's requirement for additional preclinical studies or clinical trials;
●
the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for licensure;
●
the data collected from clinical trials of our product candidates may not be sufficient to the satisfaction of the FDA or comparable foreign regulatory authorities to support the submission of a BLA or other comparable submission in foreign jurisdictions or to obtain licensure of our product candidates in the United States or elsewhere;
●
reaching agreement on acceptable terms with prospective CDMOs and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CDMOs and clinical trial sites;
●
obtaining IRB or ethics committee approval at each clinical trial site;
●
recruiting an adequate number of suitable patients to participate in a clinical trial;
●
having subjects complete a clinical trial or return for post-treatment follow-up;
35
●
clinical trial sites deviating from clinical trial protocol or dropping out of a clinical trial;
●
addressing subject safety concerns that arise during the course of a clinical trial;
●
adding a sufficient number of clinical trial sites;
●
obtaining sufficient product supply of product candidate for use in preclinical studies or clinical trials from third-party suppliers;
●
the FDA's or the applicable foreign regulatory agency's findings of deficiencies or failure to approve the manufacturing processes or facilities of third-party manufacturers upon which we rely; or
●
the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.
We may experience numerous
adverse or unforeseen events during, or as a result of, preclinical studies and clinical trials that could delay or prevent our ability
to receive marketing approval or commercialize our product candidates, including:
●
we may receive feedback from regulatory authorities that requires us to modify the design of our clinical trials;
●
we may obtain a result from preclinical studies such as a binder specificity study or a safety toxicology study that require us to modify the design of our clinical trials, abandon our research efforts for product candidates, or result in delays;
●
clinical trials of our product candidates may produce negative or inconclusive results and we may decide, or regulators may require us, to conduct additional clinical trials or abandon our research efforts for our other product candidates;
●
the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate or participants may drop out of our clinical trials at a higher rate than we anticipate;
●
our third-party contractors may fail to comply with regulatory requirements, fail to maintain adequate quality controls or be unable to provide us with sufficient product supply to conduct and complete preclinical studies or clinical trials of our product candidates in a timely manner, or at all;
●
we or our investigators might have to suspend or terminate clinical trials of our product candidates for various reasons, including non-compliance with regulatory requirements, a finding that our product candidates have undesirable side effects or other unexpected characteristics or a finding that the participants are being exposed to unacceptable health risks;
●
the cost of clinical trials of our product candidates may be greater than we anticipate;
●
the quality of our product candidates or other materials necessary to conduct preclinical studies or clinical trials of our product candidates may be insufficient or inadequate;
●
regulators may revise the requirements for approving our product candidates, or such requirements may not be as we anticipate; and
●
future collaborators may conduct clinical trials in ways they view as advantageous to them but that are suboptimal for us.
36
If we are required to conduct
additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to
successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not positive
or are only moderately positive or if there are safety concerns, our business and results of operations may be adversely affected and
we may incur significant additional costs. In addition, costs to treat patients with relapsed or refractory cancer and to treat potential
side effects that may result from our product candidates can be significant. Accordingly, our clinical trial costs are likely to be significantly
higher than those for more conventional therapeutic technologies or drug product candidates.
We could also encounter delays
if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such clinical trials are being conducted,
by the Data Safety Monitoring Board for such clinical trial or by the FDA or other regulatory authorities. Such authorities may suspend
or terminate a clinical trial due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory
requirements or our clinical trial protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory
authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a
benefit from the product candidates, changes in governmental regulations or administrative actions or lack of adequate funding to continue
the clinical trial. For example, in July 2024, we announced a clinical hold as a result of insufficient data provided with regard to two
issues within pharmacology and toxicology of CER-1236. In November 2024, we announced that the clinical hold was resolved and that the
FDA had cleared our IND for Phase I clinical trials.
Any delay in obtaining, or
inability to obtain, applicable regulatory approval would delay or prevent commercialization of our product candidates and would materially
adversely impact our business and prospects and our ability to generate revenues from any of these product candidates will be delayed
or not realized at all. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical
trials may also ultimately lead to the denial of regulatory approval of our product candidates. If one or more of our product candidates
generally prove to be ineffective, unsafe or commercially unviable, our CER-T cell platform would have little, if any, value, which would
have a material and adverse effect on our business, financial condition, results of operations and prospects.
Any of these factors, many
of which are beyond our control, may result in our failing to obtain regulatory approval to market any of our product candidates, or a
delay in such approval, which would significantly harm our business, results of operations, and prospects. Of the large number of biological
products in development, only a small percentage successfully complete the FDA or other regulatory approval processes and are commercialized.
Even if we eventually complete clinical testing and receive licensure from the FDA or applicable foreign regulatory authorities for any
of our product candidates, the FDA or the applicable foreign regulatory may license our product candidates for a more limited indication
or a narrower patient population than we originally requested, and the FDA, or applicable foreign regulatory agency, may not license our
product candidates with the labeling that we believe is necessary or desirable for the successful commercialization of such product candidates.
Our manufacturing process needs to comply
with FDA regulations relating to the quality and reliability of such processes. Any failure to comply with relevant regulations could
result in delays in or termination of our clinical programs and suspension or withdrawal of any regulatory approvals.
In order to commercially
produce our products at a third party's facility, we will need to comply with the FDA's cGMP regulations and guidelines, including
cGTPs. We may encounter difficulties in achieving quality control and quality assurance and may experience shortages in qualified personnel.
We are subject to inspections by the FDA and comparable foreign regulatory authorities to confirm compliance with applicable regulatory
requirements. Any failure to follow cGMP, cGTP or other regulatory requirements or delay, interruption or other issues that arise in the
manufacture, fill-finish, packaging, or storage of our CER-T cells as a result of a failure of the facilities or operations of third parties
to comply with regulatory requirements or pass any regulatory authority inspection could significantly impair our ability to develop and
commercialize our CER-T cell programs, including leading to significant delays in the availability of our CER-T cells for our clinical
trials or the termination of or suspension of a clinical trial, or the delay or prevention of a filing or approval of marketing applications
for our CER-T cell product candidates. Significant non-compliance could also result in the imposition of sanctions, including warning
or untitled letters, fines, injunctions, civil penalties, failure of regulatory authorities to grant marketing approvals for our CER-T
cell product candidates, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of products, operating
restrictions and criminal prosecutions, any of which could damage our reputation and our business.
37
Even if we receive regulatory approval for
any of our product candidates, we will be subject to ongoing obligations and continued regulatory review, which may result in significant
additional expense. Additionally, our product candidates, if approved, could be subject to labeling and other restrictions and market
withdrawal and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with
our products.
If the FDA, EMA or any other
comparable regulatory authority approves any of our product candidates, the manufacturing processes, labeling, packaging, distribution,
adverse event reporting, storage, advertising, promotion and recordkeeping for the product will be subject to extensive and ongoing regulatory
requirements. These requirements include submissions of safety and other post-marketing information and reports, registration requirements,
applicable product tracking and tracing requirements and continued compliance with cGMPs, including cGTPs, and GCP, for any clinical trials
that we conduct post-approval. Later discovery of previously unknown problems with a product, including adverse events of unanticipated
severity or frequency, or with any future potential manufacturing facilities we may own, third-party manufacturers or manufacturing processes,
or failure to comply with regulatory requirements, may result in, among other things:
●
restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market, or voluntary product recalls;
●
fines, untitled or warning letters or holds on clinical trials;
●
refusal by the FDA, the EMA or any other comparable regulatory authority to approve pending applications or supplements to approved applications filed by us, or suspension or revocation of product approvals;
●
product seizure or detention, or refusal to permit the import or export of products; and
●
injunctions or the imposition of civil or criminal penalties.
Moreover, if any of our product
candidates are approved, our product labeling, advertising and promotion will be subject to regulatory requirements and continuing regulatory
review. The FDA strictly regulates the promotional claims that may be made about biopharmaceutical products. In particular, a product
may not be promoted for uses that are not approved by the FDA as reflected in the product's approved labeling.
Any government investigation
of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity.
The occurrence of any event or penalty described above may inhibit our or our collaborators' ability to commercialize our product
candidates, and harm our business, financial condition and results of operations.
In addition, the policies
of the FDA, the EMA and other comparable regulatory authorities may change and additional government regulations may be enacted that could
prevent, limit or delay regulatory approval of our product candidates. If we are slow or unable to adapt to changes in existing requirements
or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval
that we may have obtained, which would adversely affect our business, prospects and ability to achieve or sustain profitability.
We also cannot predict the
likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either
in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements,
or if we are unable to maintain regulatory compliance, marketing approval that has been obtained may be lost and we may not achieve or
sustain profitability.
38
Regulatory requirements in the United States
and abroad governing cell therapy products have changed frequently and may continue to change in the future, which could negatively impact
our ability to complete clinical trials and commercialize our product candidates in a timely manner, if at all.
Regulatory requirements in
the United States and abroad governing cell therapy products have changed frequently and may continue to change in the future. In
2016, the FDA established the Office of Tissues and Advanced Therapies ("OTAT") within its Center for Biologics Evaluation
and Research to consolidate the review of gene therapy and related products, and has established the Cellular, Tissue and Gene Therapies
Advisory Committee, among others, to advise this review. In September 2022, the FDA announced retitling of OTAT to the Office of
Therapeutic Products ("OTP") and elevation of OTP to a "Super Office" to meet its growing cell and gene therapy
workload. In addition, under guidelines issued by the National Institute of Health (the "NIH"), gene therapy clinical trials
are also subject to review and oversight by an institutional biosafety committee ("IBC"), a local institutional committee
that reviews and oversees research utilizing recombinant or synthetic nucleic acid molecules at that institution. Before a clinical trial
can begin at any institution, that institution's institutional review board, or IRB, and its IBC assesses the safety of the research
and identifies any potential risk to public health or the environment. While the NIH guidelines are not mandatory unless the research
in question is being conducted at or sponsored by institutions receiving NIH funding of recombinant or synthetic nucleic acid molecule
research, many companies and other institutions not otherwise subject to the NIH guidelines voluntarily follow them. Moreover, serious
adverse events or developments in clinical trials of gene therapy product candidates conducted by others may cause the FDA or other regulatory
bodies to initiate a clinical hold on our clinical trials or otherwise change the requirements for approval of any of our product candidates.
Although the FDA decides whether individual cell and gene therapy protocols may proceed, the review process and determinations of other
reviewing bodies can impede or delay the initiation of a clinical trial, even if the FDA has reviewed the trial and approved its initiation.
We may seek fast track and breakthrough
therapy designations or priority review for one or more of our product candidates, but we might not receive such designation or priority
review, and even if we do, such designation or priority review may not lead to a faster development or regulatory review or approval process,
and does not assure FDA approval of our product candidates. Even if a product qualifies for such designation or priority review, the FDA
may later decide that the product no longer meets the conditions for qualification or decide that the time period for FDA review or approval
will not be shortened.
We may seek fast track, breakthrough
therapy, and/or regenerative medicine advanced therapy designations or priority review for one or more of our product candidates.
The FDA may issue a fast
track designation to a product candidate if it is intended, whether alone or in combination with one or more other products, for the treatment
of a serious or life-threatening disease or condition, and it demonstrates the potential to address unmet medical needs for such a disease
or condition. Fast track designation applies to the combination of the product and the specific indication for which it is being studied.
The sponsor of a new biologic may request that the FDA designate the biologic as a fast track product at any time during the clinical
development of the product. For fast track products, sponsors may have greater interactions with the FDA during product development. A
fast track product may also be eligible for rolling review, where the FDA may consider for review sections of the BLA on a rolling basis
before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the BLA, the FDA
agrees to accept sections of the BLA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon
submission of the first section of the BLA. However, the FDA's goal for reviewing a BLA fast track application under the PDUFA
does not begin until the last section of the application is submitted. Fast track designation may be withdrawn by the FDA if the FDA believes
that the designation is no longer supported by data emerging in the clinical trial process.
A breakthrough therapy is
defined as a product candidate that is intended, alone or in combination with one or more other drugs, to treat a serious or life-threatening
disease or condition, and preliminary clinical evidence indicates that the product candidate may demonstrate substantial improvement over
existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.
For product candidates that have been designated as breakthrough therapies, interaction and communication between the FDA and the sponsor
of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective
control regimens. Product candidates designated as breakthrough therapies by the FDA are also eligible for priority review if supported
by clinical data at the time of the submission of the BLA.
Fast track designation, priority
review, and breakthrough therapy designation are within the discretion of the FDA. Accordingly, even if we believe that one of our
product candidates meets the criteria for any such designation, the FDA may disagree and instead determine not to make such designation.
In any event, the receipt of such designation may expedite the development or approval process, but do not change the standards for approval.
Even if a product qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions
for qualification or decide that the time period for FDA review or approval will not be shortened.
39
We may seek approval of our product candidates,
where applicable, under the FDA's accelerated approval pathway. This pathway may not lead to a faster development, regulatory review
or approval process and does not increase the likelihood that our product candidates will receive marketing approval.
A product may be eligible
for accelerated approval if it is designed to treat a serious or life-threatening disease or condition and generally provides a meaningful
advantage over available therapies upon a determination that the product candidate has an effect on a surrogate endpoint or intermediate
clinical endpoint that is reasonably likely to predict clinical benefit or on a clinical endpoint that can be measured earlier than irreversible
morbidity or mortality, ("IMM") that is reasonably likely to predict an effect on IMM or other clinical benefit. The FDA considers
a clinical benefit to be a positive therapeutic effect that is clinically meaningful in the context of a given disease, such as IMM. For
the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical
sign or other measure that is thought to predict clinical benefit, but is not itself a measure of clinical benefit. An intermediate clinical
endpoint is a clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality that is reasonably
likely to predict an effect on irreversible morbidity or mortality or other clinical benefit. The accelerated approval pathway may be
used in cases in which the advantage of a new drug over available therapy may not be a direct therapeutic advantage, but is a clinically
important improvement from a patient and public health perspective. If granted, accelerated approval is usually contingent on the sponsor's
agreement to conduct, in a diligent manner, additional post-approval confirmatory studies to verity and describe the drug's clinical
benefit. Under the FDORA, the FDA is permitted to require, as appropriate, that a post-approval confirmatory study or studies be underway
prior to approval or within a specified time period after the date of accelerated approval was granted. FDORA also requires sponsors to
send updates to the FDA every 180 days on the status of such studies, including progress toward enrollment targets, and the FDA must
promptly post this information publicly. FDORA also gives the FDA increased authority to withdraw approval of a drug or biologic granted
accelerated approval on an expedited basis if the sponsor fails to conduct such studies in a timely manner, send the necessary updates
to the FDA, or if such post-approval studies fail to verify the drug's predicted clinical benefit. Under FDORA, the FDA is empowered
to take action, such as issuing fines, against companies that fail to conduct with due diligence any post-approval confirmatory study
or submit timely reports to the agency on their progress. In addition, the FDA currently requires, unless otherwise informed by the agency,
pre-approval of promotional materials for products receiving accelerated approval, which could adversely impact the timing of the commercial
launch of the product. Thus, even if we seek to utilize the accelerated approval pathway, we may not be able to obtain accelerated approval
and, even if we do, we may not experience a faster development, regulatory review or approval process for that product. There can be no
assurance that the FDA would allow any of the product candidates we may develop to proceed on an accelerated approval pathway, and even
if the FDA did allow such pathway, there can be no assurance that such submission or application will be accepted or that any expedited
development, review or approval will be granted on a timely basis, or at all. Moreover, even if we received accelerated approval, any
post-approval studies required to confirm and verify clinical benefit may not show such benefit, which could lead to withdrawal of any
approvals we have obtained. Receiving accelerated approval does not assure that the product's accelerated approval will eventually
be converted to a traditional approval.
We may not be able to obtain orphan drug
exclusivity for one or more of our product candidates, and even if we do, that exclusivity may not prevent the FDA from approving other
competing products.
Regulatory authorities may
designate drugs for relatively small patient populations as "orphan" drugs. Generally, if a product with an orphan drug designation
subsequently receives the first marketing approval for the indication for which it has such designation, the product is entitled to a
period of market exclusivity, which, subject to certain exceptions, precludes the FDA from approving another marketing application for
the same drug for the same indication for that time period. The applicable market exclusivity period is seven years in the United States.
Obtaining orphan drug exclusivity
for our product candidates may be important to our commercial strategy. If a competitor obtains orphan drug exclusivity for and approval
of a product with the same indication as our product candidates before we do, and if the competitor's product is the same drug or
a similar medicinal product as ours, we could be excluded from the market. Even if we obtain orphan drug exclusivity after FDA approval,
we may not be able to maintain it. For example, if a competitive product that is the same drug or a similar medicinal product as our product
candidate is shown to be clinically superior to our product candidate, any orphan drug exclusivity we have obtained will not block the
approval of such competitive product. In addition, orphan drug exclusivity will not prevent the approval of a product that is the same
drug as our product candidates if the FDA finds that we cannot assure the availability of sufficient quantities of the drug to meet the
needs of the persons with the disease or condition for which the drug was designated. If one or more of these events occur, it could have
a material adverse effect on our company.
40
We are subject to stringent and changing
privacy laws, regulations and standards as well as policies, contracts and other obligations related to data privacy and security. Our
actual or perceived failure to comply with such obligations could lead to enforcement or litigation (that could result in fines or penalties),
a disruption of clinical trials or commercialization of products, reputational harm, or other adverse business effects.
In the ordinary course of
business, we will collect, receive, store, process, use, generate, transfer, disclose, make accessible, protect, secure, dispose of, transmit
and share (collectively, processing) personal data and other sensitive information, including, but not limited to, proprietary and confidential
business information, trade secrets, intellectual property, and information we collect about patients in connection with clinical trials.
Accordingly, we are, or may become, subject to numerous federal, state, local and international data privacy and data security laws, regulations,
guidance, and industry standards as well as external and internal privacy and data security policies, contracts and other obligations
that apply to our processing of personal data and the processing of personal data on our behalf.
In the United States,
federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal
data privacy laws, consumer protection laws and other similar laws (e.g., unfair or deceptive acts or practices pursuant to Section 5(a) of
the Federal Trade Commission Act). For example, HIPAA, as amended by the Health Information Technology for Economic and Clinical Health
Act ("HITECH"), and their respective implementing regulations, imposes requirements relating to the privacy, security and
transmission of protected health information. Among other things, HITECH, through its implementing regulations, makes certain of HIPAA's
privacy and security standards directly applicable to business associates, defined as a person or organization, other than a member of
a covered entity's workforce, that creates, receives, maintains or transmits protected health information for or on behalf of a
covered entity for a function or activity regulated by HIPAA as well as their covered subcontractors.
In addition, the California
Consumer Privacy Act ("CCPA") applies to personal information of consumers, business representatives, and employees, and creates
individual privacy rights and places increased privacy and security obligations on entities handling personal data of consumers or households.
The CCPA requires covered companies to provide disclosures to California consumers, affords California residents certain rights related
to their personal data, including the right to opt-out of certain sales of personal data, and allow for a new cause of action for certain
data breaches. Although there are limited exemptions for clinical trial data under the CCPA, as our business progresses, the CCPA may
become applicable and significantly impact our business activities and exemplifies the vulnerability of our business to evolving regulatory
environment related to personal data and protected health information. Furthermore, the California Privacy Rights Act of 2020,
effective January 1, 2023, expands the CCPA's requirements, including by applying to personal information of business representatives
and employees and establishing a new regulatory agency to implement and enforce the law. In addition, other states, such as Virginia and
Colorado, have also passed comprehensive privacy laws, and similar laws are being considered in several other states, as well as at the
federal and local levels. While these states, like the CCPA, also exempt some data processed in the context of clinical trials, these
developments further complicate compliance efforts, and increase legal risk and compliance costs for us and the third parties upon whom
we rely. Moreover, data privacy and security laws have been proposed at the federal, state, and local levels in recent years, which
could further complicate compliance efforts.
Outside the United States,
there are an increasing number of laws, regulations and industry standards concerning privacy, data protection, information security and
cross-border personal data transfers. For example, GDPR, UK GDPR, and China's Personal Information Protection Law impose strict
requirements for processing personal data. Failure to comply with the requirements of the GDPR and the applicable national data protection
laws of the European Union Member States may result in fines of up to €20,000,000 or up to 4% of the total worldwide annual turnover
of the preceding financial year, whichever is higher, other administrative penalties, and private litigation related to processing of
personal data brought by classes of data subjects or consumer protection organizations authorized at law to represent their interests.
If we cannot implement a valid compliance mechanism for cross-border data transfers, we may face increased exposure to regulatory actions,
substantial fines, and injunctions against processing or transferring personal data from Europe or other foreign jurisdictions. The inability
to import personal data to the United States could significantly and negatively impact our business operations, including by limiting
our ability to conduct clinical trial activities in Europe and elsewhere; limiting our ability to collaborate with parties that are subject
to such cross-border data transfer or localization laws; or requiring us to increase our personal data processing capabilities and infrastructure
in foreign jurisdictions at significant expenses. European regulators have also ordered certain companies to suspend or permanently cease
certain transfers out of Europe for allegedly violating the GDPR's cross-border data transfer limitations.
41
In addition, privacy advocates
and industry groups have proposed, and may propose, standards with which we are legally or contractually bound to comply. We are also
bound by contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful.
If any of our privacy policies or related materials or statements are found to be deficient, lacking in transparency, deceptive, unfair,
or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators or other adverse consequences.
Our obligations related to
data privacy and security are quickly changing in an increasingly stringent fashion, creating some uncertainty as to the effective future
legal framework. Additionally, these obligations may be subject to differing applications and interpretations, which may be inconsistent
or conflict among jurisdictions. As a result, preparing for and complying with these obligations requires significant resources and may
necessitate changes to our information technologies, systems and practices, as well as those of any third-party collaborators, service
providers, contractors, consultants or other third parties that process personal data on our behalf.
Although we endeavor to comply
with all applicable privacy and security obligations, we may at times fail to do so or may be perceived to have failed to do so. Moreover,
despite our efforts, we may not be successful in achieving compliance if our employees, third-party collaborators, service providers,
contractors or consultants fail to comply with such obligations, which could negatively impact our business operations and compliance
posture. For example, any failure by a third-party service provider to comply with applicable law, regulations, or contractual obligations
could result in adverse effects, including inability to or interruption in our ability to operate our business and proceedings against
us by governmental entities or others. If we fail, or are perceived to have failed, to address or comply with obligations related to data
privacy and security obligations, we could face significant consequences. These consequences may include, but are not limited to, government
enforcement actions (e.g., investigations, fines, penalties, audits and inspections, and similar); litigation (including class-related
claims); additional reporting requirements and/or oversight; temporary or permanent bans on all or some processing of personal data; orders
to destroy or not use personal data; and imprisonment of company officials. Any of these events could have a material adverse effect on
our reputation, business, or financial condition.
The impact of recent healthcare reform legislation
and other changes in the healthcare industry and in healthcare spending on us is currently unknown, and may adversely affect our business
model.
Our revenue prospects could
be affected by changes in healthcare spending and policy in the United States and abroad. We operate in a highly regulated industry
and new laws, regulations or judicial decisions, or new interpretations of existing laws, regulations or decisions, related to healthcare
availability, the method of delivery or payment for healthcare products and services could negatively impact our business, operations
and financial condition.
There have been, and likely
will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at broadening the availability
of healthcare and containing or lowering the cost of healthcare. For more information, see the section of this report titled "
Business
– Healthcare Laws and Regulations – Healthcare Reform.
"
The continuing efforts of
the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of
healthcare and/or impose price controls may adversely affect:
●
the demand for our product candidates, if we obtain regulatory approval;
●
our ability to set a price that we believe is fair for our products;
42
●
our ability to obtain coverage and reimbursement approval for a product;
●
our ability to generate revenue and achieve or maintain profitability;
●
the level of taxes that we are required to pay; and
●
the availability of capital.
Any reduction in reimbursement
from Medicare or other government programs may result in a similar reduction in payments from private payors, which may adversely affect
our future profitability.
Our business could be negatively impacted
by environmental, social and corporate governance matters or our reporting of such matters.
Investors have increased
their emphasis on the environmental, social and governance ("ESG") practices of companies across all industries, including
the environmental impact of operations and human capital management. Expectations regarding voluntary ESG initiatives and disclosures
may result in increased costs (including but not limited to increased costs related to compliance, stakeholder engagement, contracting
and insurance), enhanced compliance or disclosure obligations, or other adverse impacts to our business, financial condition, or results
of operations.
While we have internal efforts
directed at ESG matters and preparations for any increased required future disclosures, such initiatives may be costly and may not have
the desired effect. We may be perceived to be not acting responsibly in connection with these matters, which could negatively impact us.
Moreover, we may not be able to successfully complete such initiatives due to factors that are within or outside of our control. Even
if this is not the case, our actions may subsequently be determined to be insufficient by various stakeholders, and we may be subject
to investor or regulator engagement on our ESG efforts, even if such initiatives are currently voluntary.
Certain market participants,
including major institutional investors and capital providers, use third-party benchmarks and scores to assess companies' ESG profiles
in making investment or voting decisions. A failure to comply with investor expectations and standards, which are evolving and vary considerably,
or the perception that we have not responded appropriately to the growing concern for ESG issues, could result in reputational harm to
our business and could have an adverse effect on us. To the extent ESG matters negatively impact our reputation, it may also negatively
impact our share price as well as our access to and cost of capital and impede our ability to compete as effectively to attract and retain
employees, which may adversely impact our operations.
Our ability to utilize our net operating
loss carryforwards and certain other tax attributes may be limited.
Under current law, federal
net operating losses incurred in tax years beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility
of such federal net operating losses is limited to 80% of taxable income. It is uncertain if and to what extent various states will conform
to federal tax laws. Under Sections 382 and 383 of the Code, and corresponding provisions of state law, if a corporation undergoes an
"ownership change" (generally defined as a greater than 50 percentage point change (by value) in the equity ownership of certain
stockholders over a rolling three-year period), the corporation's ability to use its pre-change net operating loss carryforwards
and other pre-change tax attributes to offset its post-change income or taxes may be limited. We have not yet completed a Section 382
or Section 383 analysis, and therefore, there can be no assurances that any previously experienced ownership changes have not materially
limited our utilization of affected net operating loss carryforwards or other tax attributes. We may experience ownership changes in the
future, including in connection with the proposed Business Combination as a result of shifts in our stock ownership. We anticipate incurring
significant additional net losses for the foreseeable future, and our ability to utilize net operating loss carryforwards associated with
any such losses to offset future taxable income may be limited to the extent we incur future ownership changes. In addition, at the state
level, there may be periods during which the use of net operating loss carryforwards is suspended or otherwise limited, which could accelerate
or permanently increase state taxes owed. As a result, we may be unable to use all or a material portion of our net operating loss carryforwards
and other tax attributes, which could adversely affect our future cash flows.
43
Changes in tax laws or regulations that
are applied adversely to us or our customers may have a material adverse effect on our business, cash flow, financial condition or results
of operations.
New income, sales, use or
other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect our business operations
and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified
or applied adversely to us. For example, the incoming Trump administration proposed various U.S. federal tax law changes, which if
enacted could have a material impact on our business, cash flows, financial condition or results of operations. In addition, it is uncertain
if and to what extent various states will conform to federal tax laws. Future tax reform legislation could have a material impact on the
value of our deferred tax assets, could result in significant one-time charges, and could increase our future U.S. tax expense.
Even if we obtain FDA approval of any of
our product candidates, we may never obtain approval or commercialize such products outside of the United States, which would limit
our ability to realize their full market potential.
In order to market any products
outside of the United States, we must establish and comply with numerous and varying regulatory requirements of other countries regarding
safety and efficacy. Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory
approval in one country does not mean that regulatory approval will be obtained in any other country. Approval procedures vary among countries
and can involve additional product testing and validation and additional administrative review periods.
Seeking foreign regulatory
approvals could result in significant delays, difficulties and costs for us and may require additional preclinical studies or clinical
trials which would be costly and time consuming. Regulatory requirements can vary widely from country to country and could delay or prevent
the introduction of our products in those countries. Satisfying these and other regulatory requirements is costly, time consuming, uncertain
and subject to unanticipated delays. In addition, our failure to obtain regulatory approval in any country may delay or have negative
effects on the process for regulatory approval in other countries. We do not have any product candidates approved for sale in any jurisdiction,
including international markets, and we do not have experience in obtaining regulatory approval in international markets. If we fail to
comply with regulatory requirements in international markets or to obtain and maintain required approvals, our ability to realize the
full market potential of our products will be harmed.
Our business operations and current and
future relationships with healthcare professionals, principal investigators, consultants, customers and third-party payors in the United States
and elsewhere may be subject, directly or indirectly, to applicable anti-kickback, fraud and abuse, false claims, physician payment transparency,
health information privacy and security and other healthcare laws and regulations, which could expose us to substantial penalties.
Healthcare providers, physicians
and third-party payors in the United States and elsewhere will play a primary role in the recommendation and prescription of any
product candidates for which we obtain marketing approval. Our current and future arrangements with healthcare professionals, principal
investigators, consultants, customers and third-party payors may expose us to broadly applicable fraud and abuse and other healthcare
laws, including, without limitation, the U.S. federal Anti-Kickback Statute and the U.S. federal False Claims Act, that may
constrain the business or financial arrangements and relationships through which we sell, market and distribute any product candidates
for which we obtain marketing approval. In addition, we may be subject to physician payment transparency laws and patient privacy and
security regulation by the U.S. federal government and by the states and foreign jurisdictions in which we conduct our business.
For more information, see the section of this report titled "
Business – Healthcare Laws and Regulations.
"
Because of the breadth of
these laws and the narrowness of their exceptions and safe harbors, it is possible that our business activities can be subject to challenge
under one or more of such laws. The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current
environment of healthcare reform. Federal and state enforcement bodies have continued their scrutiny of interactions between healthcare
companies and healthcare providers, which has led to a number of significant investigations, prosecutions, convictions and settlements
in the healthcare industry.
44
Efforts to ensure that our
internal operations and future business arrangements with third parties will comply with applicable healthcare laws and regulations will
involve substantial costs. If our operations are found to be in violation of any of these laws or any other governmental regulations that
may apply to us, we may be subject to significant civil, criminal and administrative penalties, including, without limitation, damages,
monetary fines, imprisonment, disgorgement of profits, possible exclusion from participation in Medicare, Medicaid and other federal healthcare
programs, contractual damages, reputational harm, diminished profits and future earnings, additional reporting or oversight obligations
if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with the law and curtailment
or restructuring of our operations, any of which could adversely affect our ability to operate our business and pursue our strategy. If
any of the physicians or other healthcare providers or entities with whom we expect to do business, including future collaborators, are
found not to be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions
from participation in government healthcare programs, which could also affect our business.
If we fail to comply with environmental,
health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse
effect on the success of our business.
We are subject to numerous
environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage,
treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including
chemicals and biological and radioactive materials. Our operations also produce hazardous waste products. We generally contract with third
parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials.
In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages,
and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties.
Although we maintain workers'
compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous
materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental
liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous or
radioactive materials.
We may be affected by regulatory responses
to climate-related issues.
The Biden administration
has made climate change and the limitation of greenhouse gas ("GHG") emissions one of its primary objectives. Several states
and other geographic regions in the United States have also adopted legislation and regulations to reduce emissions of GHGs.
On March 6, 2024, the SEC
finalized new rules for public companies that will require extensive climate-related disclosures and significant analysis of the impact
of climate-related issues on our business strategy, results of operations, and financial condition (the "SEC Climate Disclosure
Rules"), the effectiveness of which has been delayed indefinitely pending court challenges. If implemented, the new rules would
require us to disclose our material climate-related risks and opportunities, GHG emissions inventory, climate-related targets and goals,
and financial impacts of physical and transition risks. As a result of the SEC Climate Disclosure Rules, our legal, accounting, and other
compliance expenses may increase significantly, and compliance efforts may divert management time and attention. We may also be exposed
to legal or regulatory action or claims as a result of these new regulations. All of these risks could have a material adverse effect
on our business, financial position, and/or stock price.
Risks Related to Intellectual Property
Our intellectual property rights are valuable,
and any inability to protect them could reduce the value of our products, services and brand.
The loss of any procured
intellectual property rights in our products could permit our competitors to manufacture their own version of our products. We have attempted
to protect our intellectual property rights in our products through a combination of patents, confidentiality agreements, non-compete
agreements and other contractual protection mechanisms, and we will continue to do so. While we intend to defend against threats to our
intellectual property, our patents or various contractual protections may not adequately protect our intellectual property. In addition,
we could be required to expend significant resources to defend our rights to proprietary information, and may not be successful in such
defense.
45
As such, we may not be successful
in preventing third parties from infringing, copying or misappropriating our intellectual property. There can also be no assurance that
pending patent applications owned by us will result in patents being issued to us, that patents issued to or licensed by us in the past
or in the future will not be challenged or circumvented by competitors or that such patents will be found to be valid or sufficiently
broad to protect our products or to provide us with any competitive advantage. Third parties could also obtain patents that may require
us to negotiate to obtain licenses to conduct our business, and any required licenses may not be available on reasonable terms or at all.
We also rely on confidentiality and non-compete agreements with certain employees, independent distributors, consultants and other parties
to protect, in part, trade secrets and other proprietary rights. There can be no assurance that these agreements will not be breached,
that we will have adequate remedies for any breach, that others will not independently develop substantially equivalent proprietary information
or that third parties will not otherwise gain access to our trade secrets or proprietary knowledge.
It is difficult and costly to protect our
proprietary rights, and we may not be able to ensure their protection. We cannot assure investors that any of the currently pending or
future patent applications will result in granted patents, nor can we predict how long it will take for such patents to be granted.
Our commercial success will
depend in part on us obtaining and maintaining patent protection and trade secret protection of our current and future product candidates,
as well as successfully defending these patents against third-party challenges. Our ability to stop third parties from making, using,
selling, offering to sell or importing our product candidates is dependent upon the extent to which we have rights under valid and enforceable
patents or trade secrets that cover these activities and the right under our licensed patents to contest alleged infringement.
The patent positions of biotechnology
and pharmaceutical companies can be highly uncertain and involve complex legal and factual questions for which important legal principles
remain unresolved. No consistent policy regarding the breadth of claims allowed in pharmaceutical patents has emerged to date in the United States
or in many jurisdictions outside of the United States. Changes in either the patent laws or interpretations of patent laws in the
United States and other countries may diminish the value of our owned or licensed intellectual property. Accordingly, we cannot predict
the breadth of claims that may be enforced in the patents that may be issued from the applications we currently or may in the future own
or license from third parties. Further, if any patents we obtain or license are deemed invalid or unenforceable, our ability to commercialize
or license our technology could be adversely affected.
Others have filed, and in
the future are likely to file, patent applications covering products and technologies that are similar, identical or competitive to ours
or important to our business. We cannot be certain that any patent application owned by a third party will not have priority over patent
applications filed or in-licensed by us, or that we will not be involved in interference, opposition or invalidity proceedings before
U.S. or non-U.S. patent offices.
The degree of future protection
for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or
permit us to gain or keep our competitive advantage. For example:
●
others may be able to make product candidates or develop a platform similar to, or better than, ours in a way that is not covered by the claims of our licensed or owned patents;
●
others may be able to make compounds that are similar to our product candidates but that are not covered by the claims of patents we own or that are licensed to us;
●
we or our prospective licensors or future collaborators might not have been the first to make the inventions covered by any pending patent applications issued patents that we own or license;
46
●
we or our prospective licensors or future collaborators might not have been (or may not be in the future) the first to file patent applications for certain of our inventions;
●
others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;
●
our pending patent applications may not lead to issued patents;
●
issued patents that we own or license may be held invalid or unenforceable as a result of legal challenges by our competitors or others;
●
our competitors might conduct R&D activities in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;
●
any patents that we obtain, or are licensed to us, may not provide us with any competitive advantages or protection against competitors, or may be challenged by third parties;
●
we cannot predict the scope of protection of any patent issuing based on our patent applications, including whether the patent applications that we own or may in-license in the future will result in issued patents with claims that cover our product candidates or uses thereof in the United States or in other foreign countries;
●
if we attempt to enforce our patents, a court may hold that our patents are not invalid, unenforceable or not infringed;
●
we may not develop additional proprietary technologies that are patentable;
●
we may need to initiate litigation or administrative proceedings to enforce and/or defend our patent rights which will be costly whether we win or lose;
●
we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such intellectual property;
●
we may be required to change, redesign or stop using trademarks, service marks, domain names, logos, trade names and other identifiers that we own or use to avoid infringing the rights of third parties;
●
we may fail to adequately protect and police our trade secrets; or
●
the patents of others may have an adverse effect on our business, including if others obtain patents claiming subject matter similar to or improving that covered by our patents and patent applications.
Should any of these events
occur, they could significantly harm our business, results of operations and prospects.
Without patent protection
on the composition of matter of our product candidates, our ability to assert our patents to stop others from using or selling our product
candidates in a non-pharmaceutically acceptable formulation may be limited.
Due to the patent laws of
a country, or the decisions of a patent examiner in a country, or our own filing strategies, we may not obtain patent coverage for all
of our product candidates or methods involving these candidates in parent patent applications. We may have to pursue divisional patent
applications or continuation patent applications in the United States and other countries to obtain claim coverage for inventions
which were disclosed but not claimed in parent patent applications.
Moreover, it is possible
that our pending patent applications will not result in granted patents, and even if such pending patent applications are granted as patents,
they may not provide a basis for intellectual property protection of commercially viable products nor provide us with any competitive
advantages. Further, it is possible that, for any of the patents that may be granted in the future, others will design around the patent
rights or identify cancer treatment methods that do not concern the rights covered by our patent rights or licenses. Further, we cannot
assure investors that other parties will not challenge any patents granted to us or that courts or regulatory agencies will hold our patents
to be valid or enforceable. We also cannot guarantee that we will be successful in defending challenges made against our patents. Any
successful third-party challenge to our patents could result in the unenforceability or invalidity of such patents, or to such patents
being interpreted narrowly or otherwise in a manner adverse to our interests. Our ability to establish or maintain a technological or
competitive advantage over our competitors may be diminished because of these uncertainties.
47
We may also rely on trade
secrets to protect our technology, especially where we do not believe patent protection is appropriate or feasible. However, trade secrets
are difficult to protect. Although we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, outside
scientific collaborators and other advisors may unintentionally or willfully disclose our information to competitors or other third parties.
Enforcing a claim that a third party illegally obtained and is using any of our trade secrets may be expensive and time consuming, and
the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets.
Moreover, our competitors may independently develop equivalent knowledge, methods and know-how.
If we are unable to obtain and maintain
patent protection for any products we develop and for our technology, or if the scope of the patent protection obtained is not sufficiently
broad, our competitors could develop and commercialize products and technology similar or identical to ours, and our ability to commercialize
any product candidates we may develop and our technology may be adversely affected.
Our success depends in large
part on our ability to obtain and maintain patent protection in the United States and other countries with respect to our product
candidates, their respective components, formulations, combination therapies, methods used to manufacture them and methods of treatment
and development that are important to our business. If we do not adequately protect our intellectual property rights, competitors may
be able to erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability.
To protect our proprietary position, we file patent applications in the United States and abroad related to our product candidates
that are important to our business; we may in the future also license or purchase patent applications filed by others. If we are unable
to secure or maintain patent protection with respect to our technology and any proprietary products and technology we develop, our business,
financial condition, results of operations and prospects could be materially harmed.
We cannot provide any assurances
that any of our current or future patents have or will include claims with a scope sufficient to protect our current and future product
candidates or otherwise provide any competitive advantage. In addition, the laws of foreign countries may not protect our rights to the
same extent as the laws of the United States. Furthermore, patents have a limited lifespan. In the United States, the natural
expiration of a patent is generally 20 years after its earliest U.S. non-provisional filing date. Various extensions may be
available; however, the life of a patent, and the protection it affords, is limited. Given the amount of time required for the development,
testing and regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such
candidates are commercialized. As a result, our intellectual property may not provide us with sufficient rights to exclude others from
commercializing products similar or identical to ours. Moreover, some of our patents and patent applications are, and may in the future
be, owned by or co-owned with third parties. Any of the foregoing could have a material adverse effect on our competitive position, business,
financial conditions, results of operations and prospects.
The patent prosecution process
is complex, expensive, time-consuming and inconsistent across jurisdictions. We may not be able to file, prosecute, maintain, enforce,
or license all necessary or desirable patent rights at a commercially reasonable cost or in a timely manner. In addition, we may not pursue
or obtain patent protection in all relevant markets. It is possible that we will fail to identify important patentable aspects of our
R&D efforts in time to obtain any patent protection. While we enter into non-disclosure and confidentiality agreements with parties
who have access to confidential or patentable aspects of our R&D efforts, including for example, our employees, former employees,
corporate collaborators, external academic scientific collaborators, CROs, contract manufacturers, consultants, advisors and other third
parties, any of these parties may breach the agreements and disclose such output before a patent application is filed, thereby endangering
our ability to seek patent protection. In addition, publications of discoveries in the scientific and scholarly literature often lag behind
the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months
after filing, or in some cases not at all. Consequently, we cannot be certain that we were the first to file for patent protection on
the inventions claimed in our patents or pending patent applications.
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The issuance or grant of
a patent is not irrefutable as to its inventorship, scope, validity or enforceability, and our patents may be challenged in the courts
or patent offices in the United States and abroad. There may be prior art of which we are not aware that may affect the validity
or enforceability of a patent claim. There also may be prior art of which we are aware, but which we do not believe affects the validity
or enforceability of a claim, which may, nonetheless, ultimately be found to affect the validity or enforceability of a claim. We may
in the future, become subject to a third-party pre-issuance submission of prior art or opposition, derivation, revocation, re-examination,
post-grant or
inter partes
review, or interference proceedings or other similar proceedings challenging our patent rights or the
patent rights of others in the USPTO or other foreign patent office. An unfavorable determination in any such submission, proceeding or
litigation could reduce the scope of or invalidate our patent rights, allow third parties to commercialize our technology or products
and compete directly with us, without payment to us, or extinguish our ability to manufacture or commercialize products without infringing
third-party patent rights.
Third-party claims of intellectual property
infringement may prevent or delay our product discovery and development efforts, and could increase our costs.
Our commercial success depends
in part on our avoiding infringement of the patents and proprietary rights of third parties. There is a substantial amount of litigation
involving patents and other intellectual property rights in the biotechnology and pharmaceutical industries, as well as administrative
proceedings for challenging patents, including interference, reexamination, and post grant review proceedings before the USPTO or oppositions
and other comparable proceedings in foreign jurisdictions. We may be exposed to, or threatened with, future litigation by third parties
having patent or other intellectual property rights alleging that our product candidates and/or proprietary technologies infringe their
intellectual property rights. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third
parties, exist in the fields in which we are developing our product candidates. As the biotechnology and pharmaceutical industries expand
and more patents are issued, the risk increases that our product candidates may give rise to claims of infringement of the patent rights
of others. Moreover, it is not always clear to industry participants, including us, which patents cover various types of drugs, products
or their methods of use or manufacture. Thus, because of the large number of patents issued and patent applications filed in our fields,
there may be a risk that third parties allege they have patent rights encompassing our product candidates, technologies or methods.
Third parties may assert
that we are employing their proprietary technology without authorization. Generally, conducting preclinical and clinical trials and other
development activities in the United States is not considered an act of infringement. If CER-1236 or another product candidate is
cleared/approved by the FDA, a third party may then seek to enforce its patent by filing a patent infringement lawsuit against us. While
we do not believe that any patent claims that could have a materially adverse effect on the commercialization of our product candidates
are valid and enforceable, we may be incorrect in this belief, or we may not be able to prove it in litigation. In this regard, patents
issued in the United States by law enjoy a presumption of validity that can be rebutted only with evidence that is "clear and
convincing," a heightened standard of proof. There may be issued third-party patents of which we are currently unaware with claims
to compositions, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates.
Patent applications can take many years to issue. There may be currently pending patent applications which may later result in issued
patents that our product candidates may infringe. In addition, third parties may obtain patents in the future and claim that use of our
technologies infringes upon these patents. Moreover, we may fail to identify relevant patents or incorrectly conclude that a patent is
invalid, not enforceable, exhausted, or not infringed by our activities. If any third-party patents were held by a court of competent
jurisdiction to cover the manufacturing process of our product candidates, constructs or molecules used in or formed during the manufacturing
process, or any final product itself, the holders of any such patents may be able to block our ability to commercialize the product candidate
unless we were to obtain a license under the applicable patents, or until such patents expire or they are finally determined to be held
invalid or unenforceable. Similarly, if any third-party patent were held by a court of competent jurisdiction to cover aspects of our
formulations, processes for manufacture or methods of use, the holders of any such patent may be able to block our ability to develop
and commercialize the product candidate unless we were to obtain a license or until such patent expires or is finally determined to be
held invalid or unenforceable. In either case, such a license may not be available on commercially reasonable terms or at all. If we are
unable to obtain a necessary license to a third-party patent on commercially reasonable terms, or at all, our ability to commercialize
our product candidates may be impaired or delayed, which could in turn significantly harm our business. Even if we obtain a license, it
may be non-exclusive, thereby giving our competitors access to the same technologies licensed to us. In addition, if the breadth or strength
of protection provided by our patents is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize
current or future product candidates.
49
Parties making claims against
us may seek and obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize
our product candidates. Defense of these claims, regardless of their merit, could involve substantial litigation expense and would be
a substantial diversion of employee resources from our business. In the event of a successful claim of infringement against us, we may
have to pay substantial damages, including treble damages and attorneys' fees for willful infringement, obtain one or more licenses
from third parties, pay royalties or redesign our infringing products, which may be impossible or require substantial time and monetary
expenditure. We cannot predict whether any such license would be available at all or whether it would be available on commercially reasonable
terms. Furthermore, even in the absence of litigation, we may need or may choose to obtain licenses from third parties to advance our
research or allow commercialization of our product candidates. We may fail to obtain any of these licenses at a reasonable cost or on
reasonable terms, if at all. In that event, we would be unable to further develop and commercialize our product candidates, which could
harm our business significantly.
We could be found liable
for monetary damages, including treble damages and attorneys' fees, if we are found to have willfully infringed a patent of a third
party. A finding of infringement could prevent us from commercializing our product candidates or any future product candidates or force
us to cease some of our business operations, which could materially harm our business.
Although we have reviewed
certain third-party patents and patent filings that we believe may be relevant to our therapeutic candidates or products, we have not
conducted a freedom-to-operate search or analysis for any of our therapeutic candidates or products, and we may not be aware of patents
or pending or future patent applications that, if issued, would block us from commercializing our therapeutic candidates or products.
Thus, we cannot guarantee that our therapeutic candidates or products, or our commercialization thereof, do not and will not infringe
any third party's intellectual property.
We may not be successful in obtaining or
maintaining necessary rights to product components and processes for our manufacturing and development pipeline through acquisitions and
in-licenses.
Presently, we have rights
to certain intellectual property, under issued patents that we own, including U.S. Patent No. 11,708,423 and EP Patent No. 3,519,441,
which relate to CER-1236, as well as additional patents which relate to certain other product candidates. U.S. Patent Application Number
16/646,530 was allowed and later issued on July 25, 2023 as U.S. Patent Number 11,708,423. This patent provides coverage over our CER-1236
product candidate and includes claims directed to a CER comprising, at least in part, a Tim-4phosphatidylserine binding domain and a TLR
signaling domain. Because additional product candidates may require the use of proprietary rights held by third parties, the growth of
our business will likely depend in part on our ability to acquire, in-license or use these proprietary rights. In addition, while we have
patent rights directed to certain T cell constructs, we may not be able to obtain intellectual property rights to broader T cell or engineered
T cell constructs.
Our product candidates may
also require specific formulations to work effectively and efficiently and these rights may be held by others. Similarly, efficient production
or delivery of our product candidates may also require specific compositions or methods, and the rights to these may be owned by third
parties. We may be unable to acquire or in-license any compositions, methods of use, processes or other third-party intellectual property
rights from third parties that we identify as necessary or important to our business operations. We may fail to obtain any of these licenses
at a reasonable cost or on reasonable terms, if at all, which would harm our business. We may need to cease use of the compositions or
methods covered by such third-party intellectual property rights, and may need to seek to develop alternative approaches that do not infringe
on such intellectual property rights which may entail additional costs and development delays, even if we were able to develop such alternatives,
which may not be feasible. Even if we are able to obtain a license, it may be non-exclusive, thereby giving our competitors access to
the same technologies licensed to us. In that event, we may be required to expend significant time and resources to develop or license
replacement technology. Moreover, the specific antibodies that will be used with our product candidates may be covered by the intellectual
property rights of others.
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Additionally, we may collaborate
with academic institutions to accelerate our preclinical research or development under written agreements with these institutions. In
certain cases, these institutions may provide us with an option to negotiate a license to any of the institution's rights in technology
resulting from the collaboration. Regardless of such option, we may be unable to negotiate a license within the specified timeframe or
under terms that are acceptable to us. If we are unable to do so, the institution may offer the intellectual property rights to others,
potentially blocking our ability to pursue our program. If we are unable to successfully obtain rights to required third-party intellectual
property or to maintain the existing intellectual property rights we have, we may have to abandon development of such program and our
business and financial condition could suffer.
The licensing and acquisition
of third-party intellectual property rights is a competitive area, and companies which may be more established, or have greater resources
than we do, may also be pursuing strategies to license or acquire third-party intellectual property rights that we may consider necessary
or attractive in order to commercialize our product candidates. More established companies may have a competitive advantage over us due
to their size, cash resources and greater clinical development and commercialization capabilities.
We may be involved in lawsuits to protect
or enforce our patents which could be expensive, time-consuming and unsuccessful.
Competitors may infringe
our patents. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming.
In addition, in a legal proceeding, a court may decide that one or more of our patents is not valid or is unenforceable or may refuse
to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An
adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated, held unenforceable
or interpreted narrowly and could put one or more of our pending patent applications at risk of not issuing. Defense of these claims,
regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from
our business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, including treble
damages and attorneys' fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign
our infringing products, which may be impossible or require substantial time and monetary expenditure.
Interference or derivation
proceedings provoked by third parties or brought by the USPTO may be necessary to determine the priority or provenance of inventions with
respect to our patents or patent applications or those of our prospective licensors. An unfavorable outcome could result in a loss of
our current patent rights and could require us to cease using the related technology or to attempt to license rights to it from the prevailing
party. Our business could be harmed if the prevailing party does not offer us a license on commercially reasonable terms. Litigation or
interference or derivation proceedings may result in a decision adverse to our interests and, even if we are successful, may result in
substantial costs and distract our management and other employees. We may not be able to prevent, alone or with our licensors, misappropriation
of our trade secrets or confidential information, particularly in countries where the laws may not protect those rights as fully as in
the United States.
Furthermore, because of the
substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential
information could be compromised by disclosure during this type of litigation. In addition, there could be public announcements of the
results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results
to be negative, it could have a substantial adverse effect on the price of our Common Stock.
Obtaining and maintaining our patent protection
depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent
agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance and
annuity fees on any issued patent are due to be paid to the USPTO and patent agencies outside the United States in several stages
over the lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural,
documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases
be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance
can result in abandonment or lapse of the patent, resulting in partial or complete loss of patent rights in the relevant jurisdiction.
Non-compliance events that could result in abandonment or lapse of a patent include failure to respond to official actions within prescribed
time limits, non-payment of fees and failure to properly legalize and submit formal documents. If we fail to maintain the patents covering
our product candidates, our competitors might be able to enter the market, which would harm our business. In addition, to the extent that
we have responsibility for taking any action related to the prosecution or maintenance of patents or patent application in-licensed from
a third party, any failure on our part to maintain the in-licensed rights could jeopardize our rights under the relevant license and may
expose us to liability.
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We may be subject to claims challenging
the inventorship of our patents and other intellectual property.
We may in the future be subject
to claims that former employees, collaborators, or other third parties have an interest in our patents or other intellectual property
as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations of consultants or others
who are involved in developing our product candidates. Litigation may be necessary to defend against these and other claims challenging
inventorship. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property
rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse
effect on our business. Even if we are successful in defending against such claims, litigation could result in substantial costs and be
a distraction to management and other employees.
We may need to license intellectual property
from third parties, and such licenses may not be available or may not be available on commercially reasonable terms.
A third party may hold intellectual
property rights, including patent rights, that are important or necessary to the development or manufacture of our product candidates.
It may be necessary for us to use the patented or proprietary technology of third parties to commercialize our product candidates, in
which case we would be required to obtain a license from these third parties. Such a license may not be available on commercially reasonable
terms, or at all, and we could be forced to accept unfavorable contractual terms. If we are unable to obtain such licenses on commercially
reasonable terms, our business could be harmed.
Issued patents covering our product candidates
could be found unpatentable, invalid or unenforceable if challenged in court or the USPTO.
If we initiate legal proceedings
against a third party to enforce a patent covering one of our product candidates, the defendant could counterclaim that the patent covering
our product candidate, as applicable, is invalid and/or unenforceable. In patent litigation in the United States, defendant counterclaims
alleging invalidity and/or unenforceability are commonplace, and there are numerous grounds upon which a third party can assert invalidity
or unenforceability of a patent. Third parties may also raise similar claims before administrative bodies in the United States or
abroad, even outside the context of litigation. Such mechanisms include
inter partes
review,
ex parte
re-examination and
post grant review in the United States, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings).
Such proceedings could result in revocation or amendment to our patents in such a way that they no longer cover and protect our product
candidates. The outcome following legal assertions of unpatentability, invalidity and unenforceability is unpredictable. With respect
to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we, our patent counsel and
the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of unpatentability, invalidity
and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our product candidates. Such a loss
of patent protection could have a material adverse impact on our business.
Changes to patent law in the United States
and in foreign jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our products.
As is the case with other
biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing
patents in the biopharmaceutical industry involve both technological and legal complexity, and is therefore costly, time-consuming and
inherently uncertain. In addition, the United States continues to adapt to wide-ranging patent reform legislation, including legislation
that became effective starting in 2012. Moreover, recent U.S. Supreme Court rulings have narrowed the scope of patent protection
available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty
with regard to our ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value
of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations
governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents
and patents that we might obtain in the future. For example, in the case
Assoc. for Molecular Pathology v. Myriad Genetics, Inc.
,
the U.S. Supreme Court held that certain claims to DNA molecules are not patentable. While we do not believe that any of the patents
owned by us will be found invalid based on this decision, we cannot predict how future decisions by the courts, Congress or the USPTO
may impact the value of our patents. Similarly, any adverse changes in the patent laws of other jurisdictions could have a material adverse
effect on our business and financial condition. Changes in the laws and regulations governing patents in other jurisdictions could similarly
have an adverse effect on our ability to obtain and effectively enforce our patent rights.
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We may not be able to protect our intellectual
property rights throughout the world.
We may not be able to protect
our intellectual property rights outside the United States. Filing, prosecuting and defending patents on product candidates in all
countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States
can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual
property rights to the same extent as federal and state laws in the United States. Consequently, we may not be able to prevent third
parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using
our inventions in other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection
to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but
enforcement is not as strong as that in the United States. These products may compete with our products and our patents or other
intellectual property rights may not be effective or sufficient to prevent them from competing.
Many companies have encountered
significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries
which we could expand to, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other
intellectual property protection, particularly those relating to biopharmaceutical products, which could make it difficult for us to stop
the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce
our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of
our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing
and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other
remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around
the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
We may be subject to claims that our employees,
consultants or independent contractors have wrongfully used or disclosed confidential information of third parties.
We have received confidential
and proprietary information from third parties. In addition, we employ individuals who were previously employed at other biotechnology
or pharmaceutical companies. We may be subject to claims that we or our employees, consultants or independent contractors have inadvertently
or otherwise used or disclosed confidential information of these third parties or our employees' former employers. Litigation may
be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial
cost and be a distraction to our management and employees.
If we are unable to protect the confidentiality
of our trade secrets, our business and competitive position would be harmed.
In addition to seeking patent
protection for our product candidates, we also rely on trade secrets, including unpatented know-how, technology and other proprietary
information, to maintain our competitive position. We seek to protect our trade secrets, in part, by entering into non-disclosure and
confidentiality agreements with parties who have access to them, such as our employees, consultants, advisors and other third parties.
We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants. Despite these efforts,
any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets. Monitoring unauthorized
uses and disclosures of our intellectual property is difficult, and we do not know whether the steps we have taken to protect our intellectual
property will be effective. In addition, we may not be able to obtain adequate remedies for any such breaches. Enforcing a claim that
a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable.
In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets.
53
Moreover, our competitors
may independently develop knowledge, methods and know-how equivalent to our trade secrets. Competitors could purchase our products and
replicate some or all of the competitive advantages we derive from our development efforts for technologies on which we do not have patent
protection. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right
to prevent them, or those to whom they communicate it, from using that technology or information to compete with us. If any of our trade
secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.
Our reliance on third parties requires us
to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated
or disclosed.
Because we will rely on third
parties to research and develop and to manufacture our product candidates, we must share trade secrets with them. We seek to protect our
proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, consulting
agreements or other similar agreements with our advisors, employees, third-party contractors and consultants prior to beginning research
or disclosing proprietary information. These agreements typically limit the rights of the third parties to use and disclose our confidential
information, including our trade secrets. Despite the contractual provisions employed when working with third parties, the need to share
trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently
incorporated into the technology of others, or are disclosed or used in violation of these agreements. Given that our proprietary position
is based, in part, on our know-how and trade secrets, a competitor's independent discovery of our trade secrets or other unauthorized
use or disclosure would impair our competitive position and may have a material adverse effect on our business.
In addition, these agreements
typically restrict the ability of our advisors, employees, third-party contractors and consultants to publish data potentially relating
to our trade secrets, although our agreements may contain certain limited publication rights. For example, any academic institution that
we may collaborate with will likely expect to be granted rights to publish data arising out of such collaboration and any joint R&D
programs may require us to share trade secrets under the terms of our R&D or similar agreements. Despite our efforts to protect our
trade secrets, our competitors may discover our trade secrets, either through breach of our agreements with third parties, independent
development or publication of information by any of our third-party collaborators. A competitor's discovery of our trade secrets
would impair our competitive position and have an adverse impact on our business.
We may not have sufficient patent lifespan
to effectively protect our products and business.
All of our patents are in
early stages. Patents have a limited lifespan. In the United States, the natural expiration of a patent is generally 20 years
after its earliest U.S. non-provisional filing date. Given the amount of time required for the development, testing and regulatory
review of new product candidates, patents protecting such candidates might expire before or shortly after the resulting products are commercialized.
As a result, our patents may not provide us with sufficient rights to exclude others from commercializing products similar or identical
to ours. We expect to seek extensions of patent terms for our issued patents, where available. This includes in the United States
under the Hatch-Waxman Act, which permits a patent term extension of up to five years beyond the original expiration date of the
patent as compensation for regulatory delays. However, such a patent term extension cannot lengthen the remaining term of a patent beyond
a total of 14 years from the product's approval date. Only one patent applicable to an approved drug is eligible for the extension
and the application for the extension must be submitted prior to the expiration of the patent. During the period of patent term extension,
the claims of a patent are not enforceable for their full scope but are instead limited to the scope of the approved product. In addition,
the applicable authorities, including the FDA in the United States, and any comparable foreign regulatory authorities, may not agree
with our assessment of whether such extensions are available, and may refuse to grant extensions to our patents, or may grant more limited
extensions than we request. In addition, we may not be granted an extension because of, for example, failing to apply within applicable
deadlines, failing to apply prior to the expiration of relevant patents or otherwise failing to satisfy applicable requirements. The terms
of our patents may also be affected by the filing of terminal disclaimers during prosecution before the USPTO and foreign authorities
recognizing similar disclaimer mechanisms. A patent subject to a terminal disclaimer may have its term limited so that its lifespan does
not extend beyond the term of a related patent having a shorter term. If any of the foregoing occurs, any period during which we have
the right to exclusively market our product will be shorter than we would otherwise have expected, and our competitors may obtain approval
of and launch products earlier than might otherwise have been the case.
54
The life of patent protection is limited,
and third parties could develop and commercialize products and technologies similar or identical to ours and compete directly with us
after a patent licensed to us expires, which could materially and adversely affect our ability to commercialize our products and technologies.
The life of a patent and
the protection it affords is limited. For example, in the United States, if all maintenance fees are timely paid, the natural expiration
of a patent is generally 20 years from its earliest U.S. non-provisional filing date. In Europe, the expiration of an invention
patent is 20 years from its filing date. Even if we successfully obtain patent protection for an approved product candidate, it may
face competition from biosimilar medications. Manufacturers of other drugs may challenge the scope, validity or enforceability of the
patents underlying our technology in court or before a patent office, and the patent holder may not be successful in enforcing or defending
those intellectual property rights and, as a result, we may not be able to develop or market the relevant product candidate exclusively,
which would materially adversely affect any potential sales of that product.
Given the amount of time
required for the development, testing and regulatory review of new product candidates, patents protecting such product candidates might
expire before or shortly after such product candidates are commercialized. As a result, the patents or pending applications licensed to
us may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours. Even if we
believe that the patents involved are eligible for certain (and time-limited) patent term extensions, there can be no assurance that the
applicable authorities, including the FDA and the USPTO, and any equivalent regulatory authority in other countries, will agree with our
assessment of whether such extensions are available, and such authorities may refuse to grant extensions to such patents, or may grant
more limited extensions than requested. Moreover, the applicable time period or the scope of patent protection afforded could be less
than requested. If we are unable to obtain patent term extension or term of any such extension is less than requested, our competitors
may obtain approval of competing products following our patent expiration, and our business could be harmed. Changes in either the patent
laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents or narrow
the scope of our patent protection.
The patent pending applications
for our product candidates are expected to expire on various dates. Upon the expiration, we will not be able to assert such licensed patent
rights against potential competitors, which would materially adversely affect our business, financial condition, results of operations
and prospects.
Risks Related to Ownership of our Securities
Sales of a substantial number of our securities
in the public market by our existing securityholders could cause the price of our Common Stock and Warrants to fall.
The securities being offered
in this prospectus represent a substantial percentage of our outstanding shares of Common Stock and Warrants.
Sales of a substantial number
of shares of our Common Stock in the public market could occur at any time (after the expiration of any applicable lock-up period, assuming
the satisfaction of any applicable vesting conditions and subject to the beneficial ownership and stock exchange limitations described
herein). These sales, or the perception in the market that the holders of a large number of shares of our Common Stock intend to sell
shares, could increase the volatility of the market price of our Common Stock or result in a significant decline in the public trading
price of our Common Stock.
55
The resale, or expected or
potential resale, of a substantial number of shares of our Common Stock in the public market could adversely affect the market price for
our Common Stock and make it more difficult for you to sell your holdings at times and prices that you determine are appropriate. Accordingly,
the adverse market and price pressures resulting from an offering pursuant to the registration statement may continue for an extended
period of time. Sales of substantial number of such shares in the public market could adversely affect the market price of our Common
Stock.
In addition to this prospectus,
we have filed:
●
a registration statement with the SEC for purposes of registering the resale from time to time of up to 210,000,000 Shares of Common Stock, which consists of (i) 208,635,705 shares of Common Stock under the New Keystone Purchase Agreement and (ii) 1,364,295 shares of Common Stock under the Old Keystone Purchase Agreement;
●
a registration statement with the SEC for purposes of registering the resale from time to time of up to 26,619,050 Shares of Common Stock, which consists of (i) 25,000,000 Keystone Purchase Shares, (ii) 619,050 Keystone Commitment Shares, and (iii) 1,000,000 Arena Commitment Shares;
●
a registration statement with the SEC for purposes of registering (1) the resale from time to time of up to 35,773,704 shares of Common Stock, which consists of (i) 2,055,709 shares of Common Stock issued to certain selling securityholders for their portion of the merger consideration in connection with the consummation of the Business Combination in exchange for shares of common stock of Legacy CERo; (ii) 20,080,000 shares of Common Stock issuable upon the conversion of shares of our Series A Preferred Stock, purchased by certain investors pursuant to the First Securities Purchase Agreement; (iii) 1,252,000 shares of Common Stock issuable upon the conversion of shares of our Series B Preferred Stock, purchased by certain investors pursuant to the Second Securities Purchase Agreement; (iv) 3,171,246 shares of Common Stock initially issued to the Sponsor and distributed to its members in a distribution-in-kind immediately prior to the Business Combination; (v) 1,000,000 shares of Common Stock issued to the Sponsor, which are subject to forfeiture upon the vesting of the Tertiary Earnout Shares; (vi) 185,004 shares of Common Stock issued to investors other than the Sponsor in a private placement concurrently with the Initial Public Offering; (vii) 1,649,500 shares of our Common Stock issued to certain third-party vendors and service providers; (viii) 324,999 shares of Common Stock issuable upon the exercise of warrants to purchase shares of our Common Stock that were converted from Legacy CERo warrants (as defined below) in connection with the Business Combination; (ix) 612,746 shares of Common Stock issuable upon the exercise of warrants to purchase shares of our Common Stock sold to certain investors pursuant to the First Securities Purchase Agreement; (x) 5,000,000 shares of Common Stock issuable upon the exercise of warrants to purchase shares of our Series A Preferred Stock sold to certain investors pursuant to the First and Second Securities Purchase Agreement and conversion of the underlying shares of Series A Preferred Stock into Common Stock and (xi) 442,500 shares of Common Stock issuable upon the exercise of Private Placement Warrants to purchase shares of our Common Stock, at an exercise price of $11.50 per share, that were originally sold in a private placement concurrently with the Initial Public Offering; and (2) the issuance by us of up to 8,750,000 shares of Common Stock issuable upon the exercise of public warrants to purchase shares of our Common Stock, at an exercise price of $11.50 per share, that were originally issued in the Initial Public Offering; and
●
a registration statement with the SEC for purposes of registering of the resale from time to time of up to 638,563,750 shares of Common Stock, which consists of (i) 57,670,954 shares of Common Stock issuable upon the conversion of shares of our Series A Preferred Stock purchased by certain investors pursuant to the First Securities Purchase Agreement; (ii) 9,182,934 shares of Common Stock issuable upon the conversion of shares of our Series B Preferred Stock purchased by certain investors pursuant to the Second Securities Purchase Agreement; (iii) 70,739,367 shares of Common Stock issued upon the conversion of shares of our Series A Preferred Stock and Series B Preferred Stock; (iv) 436,683,678 shares of Common Stock issuable upon the conversion of 300% of the number of outstanding shares of our Series C Preferred Stock purchased by certain investors pursuant to the Third Securities Purchase Agreement; (v) 250,000 shares of Common Stock issued to a stockholder in a reallocation of shares in connection with the consummation of the Business Combination; (vi) 8,175,166  shares of Common Stock issuable upon the exercise of warrants to purchase shares of our Common Stock, at an exercise price of $0.098 per share, which warrants were sold to certain investors pursuant to the Third Securities Purchase Agreement (the "Series C Warrants"); and (ii) 55,861,651 shares of Common Stock issuable upon the conversion of shares of Series A Preferred Stock resulting from the exercise of outstanding Series A Preferred Warrants.
56
In addition to any resales
pursuant to such registration statements, subject to applicable transfer restrictions and the conditions to the availability of Rule 144
for former shell companies under Rule 144(i), shares of Common Stock held by these stockholders will be eligible for resale, potentially
subject to, in the case of stockholders who are our affiliates, volume, manner of sale, and other limitations under Rule 144 promulgated
under the Securities Act.
In addition, shares of our
Common Stock issuable upon exercise or vesting of incentive awards under our incentive plans are, once issued, eligible for sale in the
public market, subject to any lock-up agreements and, in some cases, limitations on volume and manner of sale applicable to affiliates
under Rule 144. Furthermore, shares of our Common Stock reserved for future issuance under our incentive plan may become available for
sale in future.
The market price of shares
of our Common Stock could drop significantly if the holders of the shares of Common Stock described above sell them or are perceived by
the market as intending to sell them. These factors could also make it more difficult for us to raise additional funds through future
offerings of shares of our Common Stock or other securities.
Certain existing securityholders purchased
our securities at a price below the current trading price of such securities, and may experience a positive rate of return based on the
current trading price. Future investors in us may not experience a similar rate of return.
Certain of our securityholders
acquired our securities at prices below the current trading prices of our Common Stock and Public Warrants and may experience a positive
rate of return ranging from $0.00 to $0.078 based on the current trading prices. In particular, the effective purchase prices at which
certain Legacy CERo Stockholders and the Sponsor acquired their shares of our Common Stock are generally substantially less than the Initial
Public Offering price of $10.00 per share, after giving effect to the Exchange Ratio (as defined in the Business Combination Agreement).
Consequently, these securityholders may have an incentive to sell their shares of our Common Stock even if the trading price is below
the price paid by investors in the Initial Public Offering, which could cause the market price of our Common Stock to decline. Such stockholders
may realize a positive rate of return on the sale of their shares of Common Stock covered by this prospectus even if the market price
per share of our Common Stock is below $0.098 per share. On December 18, 2024, the closing prices of our Common Stock and our Public Warrants
as reported on the Nasdaq were $0.06 per share and $0.009 per Public Warrant, respectively.
Holders of our Warrants will
be less likely to exercise their Warrants if the exercise prices of their Warrants exceed the market price of our Common Stock. There
is no guarantee that our Warrants will continue to be in the money prior to their expiration, and as such, the Warrants may expire worthless.
As such, any cash proceeds that we may receive in relation to the exercise of the Warrants overlying shares of Common Stock being offered
for sale in this prospectus will be dependent on the trading price of our Common Stock. There is no assurance that the holders of the
Warrants will elect to exercise any or all of such Warrants. As of the date of this prospectus, (i) all of the Private Placement Warrants
and Public Warrants, which have an exercise price of $11.50 per share, (ii) all of the Rollover Warrants, which have an exercise price
of $10.00 per share, and (iii) all of the Series A Warrants, which have a current exercise price of $1.39 per share, are "out of
the money," meaning the exercise price is higher than the market price of our Common Stock. Holders of such "out of the money"
Warrants are not likely to exercise such Warrants. There can be no assurance that such Warrants will be in the money prior to their respective
expiration dates, and therefore, we may not receive any cash proceeds from the exercise of such Warrants.
An active trading market for our Common
Stock may not be available on a consistent basis to provide stockholders with adequate liquidity. The price of our Common Stock may be
extremely volatile, and stockholders could lose all or part of their investment.
The trading price of our
Common Stock is likely to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are
beyond our control, including limited trading volume. In addition to the factors discussed in this "
Risk Factors
" section
and elsewhere in this prospectus, these factors include:
●
the commencement, enrollment or results of any planned and future preclinical studies and clinical trials of our product candidates or changes in the development status of our product candidates;
57
●
any delay in our regulatory filings for our product candidates and any adverse development or perceived adverse development with respect to the applicable regulatory authority's review of such filings;
●
adverse results from or delays in preclinical studies and clinical trials of our product candidates, including as a result of clinical holds, safety events, enrollment difficulties, or study protocol amendments;
●
our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial;
●
adverse regulatory decisions, including failure to receive regulatory approval of our drug to market for our product candidates;
●
adverse developments concerning our manufacturers;
●
our inability to obtain adequate product supply for any approved drug or inability to do so at acceptable prices;
●
our inability to establish collaborations, if needed;
●
our failure to commercialize our product candidates;
●
additions or departures of key scientific or management personnel;
●
unanticipated serious safety concerns related to the use of our product candidates;
●
introduction of new drugs by our competitors;
●
announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors;
●
any significant change in our management;
●
our ability to effectively manage our growth;
●
the size and growth of our initial target markets;
●
actual or anticipated variations in quarterly operating results;
●
our cash position;
●
our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public;
●
the public's response to press releases or other public announcements by us or third parties, including our filings with the SEC;
●
publication of research reports about us or our industry, or microbiome therapies in particular, or positive or negative recommendations or withdrawal of research coverage by securities analysts;
●
guidance, if any, that we provide to the public, any changes in this guidance or our failure to meet this guidance;
●
changes in the market valuations of similar companies;
58
●
overall performance of the equity markets;
●
sales of our Common Stock by us or our stockholders, in the future;
●
trading volume of our Common Stock;
●
investor perceptions of the investment opportunity associated with our Common Stock relative to other investment alternatives;
●
actions by institutional or activist stockholders;
●
change in accounting standards, policies, guidelines, interpretations or principles;
●
ineffectiveness of our internal controls;
●
disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our technologies;
●
significant lawsuits, including patent or stockholder litigation;
●
changes in the structure of healthcare payments systems;
●
issuance of additional shares of our Common Stock to comply with the full ratchet antidilution rights contained in our outstanding Warrants;
●
failure to raise additional funds on acceptable terms, or at all;
●
changes in business or regulatory conditions, including new laws or regulations or new interpretations of existing laws or regulations applicable to our business;
●
general political, economic, industry and market conditions, including rising interest rates and inflation; and
●
other events or factors, many of which are beyond our control.
In addition, the stock market
in general, and the markets for special purpose acquisition company ("SPAC") post-business combination businesses and healthcare
companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to
the operating performance of these companies. Broad market and industry factors may negatively affect the market price of our Common Stock,
regardless of our actual operating performance. In addition, price volatility may be greater if the public float and trading volume of
our Common Stock is low. If the market price of our Common Stock falls, you may not realize any return on your investment and may lose
some or all of your investment. In the past, securities class action litigation has often been instituted against companies following
periods of volatility in the market price of a company's securities. This type of litigation, if instituted, could result in substantial
costs and a diversion of management's attention and resources, which would harm our business, operating results or financial condition.
Unstable market and economic conditions
may have serious adverse consequences on our business, financial condition and stock price.
The global economy, including
credit and financial markets, has experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability,
declines in consumer confidence, declines in economic growth, increases in unemployment rates, increases in inflation rates, higher interest
rates and uncertainty about economic stability. For example, the Russia-Ukraine war and the Israel-Hamas war created volatility in the
global capital markets and may have further global economic consequences, including disruptions of the global supply chain and energy
markets. There have also been disruptions to the U.S. banking system due to bank failures in the past several years, including with
respect to Silicon Valley Bank, Signature Bank and First Republic Bank. Any such volatility and disruptions may have adverse consequences
on us or the third parties on whom it relies. If the equity and credit markets deteriorate, including as a result of political unrest
or war, it may make any necessary debt or equity financing more difficult to obtain in a timely manner or on favorable terms, more costly
or more dilutive. Increased inflation rates can adversely affect us by increasing its costs, including labor and employee benefit costs.
In addition, higher inflation could also increase customers' operating costs, which could result in reduced budgets for customers
and potentially less demand for our products, if and when approved. Any significant increases in inflation and related increase in interest
rates could have a material adverse effect on our business, results of operations and financial condition.
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We do not intend to pay dividends on our
Common Stock, so any returns will be limited to the value of its stock.
We currently anticipate that
we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying
any cash dividends for the foreseeable future. In addition, future debt or other financing arrangements may contain terms prohibiting
or limiting the amount of dividends that may be declared or paid on our Common Stock. Any return to stockholders will therefore be limited
in the foreseeable future to the appreciation of the market price (if any) of our stock.
We are an "emerging growth company"
and a "smaller reporting company", and the reduced reporting requirements applicable to emerging growth companies and smaller
reporting companies may make our Common Stock less attractive to investors.
We are an "emerging
growth company" within the meaning of the Securities Act, as modified by the JOBS Act. For as long as we continue to be an emerging
growth company, we may take advantage of certain exemptions from various public company reporting requirements that are applicable to
other public companies that are not emerging growth companies, including being permitted to provide only two years of audited financial
statements, in addition to any required unaudited interim financial statements with correspondingly reduced "Management's
Discussion and Analysis of Financial Condition and Results of Operations" disclosure, not being required to have its internal control
over financial reporting audited by our independent registered public accounting firm under Section 404 of the Sarbanes-Oxley Act
("Section 404"), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements,
and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden
parachute payments not previously approved. We may take advantage of these exemptions until the last day of the fiscal year ending
after the fifth anniversary of the consummation of our IPO or until we are no longer an emerging growth company, whichever is earlier.
We will cease to be an emerging growth company prior to the end of such five-year period if certain earlier events occur, including if
we become a "large accelerated filer" as defined in Rule 12b-2 under the Exchange Act, our annual gross revenues
equal or exceed $1.235 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period prior to
such time. In particular, in this prospectus on, we have provided only two years of audited financial statements and have not included
all of the executive compensation related information that would be required if it were not an emerging growth company, and it may elect
to take advantage of other reduced reporting requirements in future filings. Accordingly, the information contained herein may be different
than the information you receive from other public companies in which you hold stock.
In addition, the JOBS Act
provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting
standards. We have elected to take advantage of the extended transition period to comply with new or revised accounting standards and
to adopt certain of the reduced disclosure requirements available to emerging growth companies. As a result of the accounting standards
election, we will not be subject to the same implementation timing for new or revised accounting standards as other public companies that
are not emerging growth companies, which may make comparison of its financials to those of other public companies more difficult. As a
result of these elections, the information that we provide in this prospectus may be different than the information you may receive from
other public companies in which you hold equity interests. In addition, it is possible that some investors will find our Common Stock
less attractive as a result of these elections, which may result in a less active trading market for our Common Stock and higher volatility
in its share price.
We are also a "smaller
reporting company" as defined in the Exchange Act. We may continue to be a smaller reporting company even after we is no longer
an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will
be able to take advantage of these scaled disclosures for so long as our Common Stock held by non-affiliates is less than $250.0 million
measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100.0 million during the
most recently completed fiscal year and our Common Stock held by non-affiliates is less than $700.0 million measured on the last
business day of our second fiscal quarter.
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Our operating results may fluctuate significantly,
which makes future operating results difficult to predict and could cause operating results to fall below expectations or guidance.
Our operations to date have
been primarily limited to researching and developing our product candidates. We have not yet obtained regulatory approvals for any of
its product candidates. Consequently, any predictions you make about our future success or viability may not be as accurate as they could
be if we had a longer operating history or approved products on the market.
Our quarterly and annual
operating results may fluctuate significantly in the future, which makes it difficult for us to predict future operating results. From
time to time, we may enter into license or collaboration agreements with other companies that include development funding and significant
upfront and milestone payments and/or royalties, which may become an important source of our revenue. Accordingly, our revenue may depend
on development funding and the achievement of development and clinical milestones under current and any potential future license and collaboration
agreements and sales of our drugs, if approved. These upfront and milestone payments may vary significantly from period to period and
any such variance could cause a significant fluctuation in operating results from one period to the next.
In addition, our measures
compensation cost for stock-based awards made to employees, directors and non-employee consultants based on the fair value of the award
on the grant date and we recognize the cost as an expense over the requisite service period, as applicable. Because the variables that
we uses as a basis for valuing stock-based awards change over time, including our underlying stock price and stock price volatility, the
magnitude of the expense that we must recognize may vary significantly.
Furthermore, operating results
may fluctuate due to a variety of other factors, many of which are outside of our control and may be difficult to predict, including the
following:
●
delays in the commencement, enrollment and the timing of clinical testing for our product candidates;
●
the timing and success or failure of clinical trials for our product candidates or competing product candidates, or any other change in the competitive landscape of our industry, including consolidation among our competitors or partners;
●
any delays in regulatory review and approval of product candidates in clinical development;
●
the timing and cost of, and level of investment in, R&D activities relating to our product candidates, which may change from time to time;
●
the cost of manufacturing our product candidates, which may vary depending on FDA guidelines and requirements, and the quantity of production;
●
Our ability to obtain additional funding to develop product candidates;
●
expenditures that our will or may incur to acquire or develop additional product candidates and technologies;
●
the level of demand for our product candidates, should they receive approval, which may vary significantly;
●
potential side effects of our product candidates that could delay or prevent commercialization or cause an approved drug to be taken off the market;
●
the ability of patients or healthcare providers to obtain coverage of or sufficient reimbursement for our product candidates, if approved;
61
●
Our dependency on third-party manufacturers to supply or manufacture our product candidates;
●
Our ability to establish an effective sales, marketing and distribution infrastructure in a timely manner;
●
market acceptance of our product candidates, if approved, and our ability to forecast demand for those product candidates;
●
Our ability to receive approval and commercialize product candidates outside of the United States;
●
Our ability to establish and maintain collaborations, licensing or other arrangements;
●
Our ability and third parties' abilities to protect intellectual property rights;
●
costs related to and outcomes of potential litigation or other disputes;
●
Our ability to adequately support future growth;
●
Our ability to attract and retain key personnel to manage our business effectively;
●
potential liabilities associated with hazardous materials;
●
Our ability to maintain adequate insurance policies; and
●
future accounting pronouncements or changes in our accounting policies.
The cumulative effect of
such factors could result in large fluctuations and unpredictability in quarterly and annual operating results. As a result, comparing
operating results on a period-to-period basis may not be meaningful. Investors should not rely on past results as an indication of future
performance. This variability and unpredictability could also result in our failing to meet the expectations of industry or financial
analysts or investors for any period. If our revenue or operating results fall below the expectations of analysts or investors or below
any forecasts we may provide to the market, or if the forecasts we provide to the market are below the expectations of analysts or investors,
the price of our Common Stock could decline substantially. Such a stock price decline could occur even when we have met any previously
publicly stated revenue and/or earnings guidance we may provide.
Anti-takeover provisions
under our organizational documents and Delaware law could delay or prevent a change of control which could limit the market price of our
Common Stock and may prevent or frustrate attempts by our stockholders to replace or remove our then-current management.
Our Charter and Bylaws, contain
provisions that could delay or prevent a change of control of our board of directors that our stockholders might consider favorable. Some
of these provisions include:
●
a board of directors divided into three classes serving staggered three-year terms, such that not all members of the board of directors will be elected at one time;
●
a prohibition on stockholder action through written consent, which requires that all stockholder actions be taken at a meeting of our stockholders;
●
a requirement that special meetings of stockholders be called only by the chairperson of our board of directors, our Chief Executive Officer or by a majority of the total number of authorized directors;
●
a requirement that no member of our board of directors may be removed from office by our stockholders except for cause and, in addition to any other vote required by law and subject to the rights of the holders of any series of preferred stock to elect additional directors under specified circumstances, upon the approval of not less than two-thirds of all outstanding shares of our voting stock then entitled to vote in the election of directors;
62
●
a requirement of approval of not less than two-thirds of all outstanding shares of our voting stock to amend any bylaws by stockholder action or to amend specific provisions of our Charter; and
●
the authority of the board of directors to issue preferred stock on terms determined by the board of directors without stockholder approval and which preferred stock may include rights superior to the rights of the holders of Common Stock.
In addition, because we are
incorporated in Delaware, we are governed by the provisions of Section 203 of the DGCL, which may prohibit certain business combinations
with stockholders owning 15% or more of our outstanding voting stock. These anti-takeover provisions and other provisions in our Charter
or Bylaws could make it more difficult for stockholders or potential acquirors to obtain control of our board of directors or initiate
actions that are opposed by the then-current board of directors and could also delay or impede a merger, tender offer, or proxy contest.
These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of
your choosing or cause us to take other corporate actions you desire. Any delay or prevention of a change of control transaction or changes
in our board of directors could cause the market price of our Common Stock to decline.
If we engage in future acquisitions or strategic
partnerships, this may increase capital requirements, dilute stockholders, cause us to incur debt or assume contingent liabilities, and
subject us to other risks.
We intend to evaluate various
acquisition opportunities and strategic partnerships, including licensing or acquiring complementary drugs, intellectual property rights,
technologies or businesses. Any potential acquisition or strategic partnership may entail numerous risks, including:
●
increased operating expenses and cash requirements;
●
the assumption of additional indebtedness or contingent liabilities;
●
the issuance of our equity securities;
●
assimilation of operations, intellectual property and drugs of an acquired company, including difficulties associated with integrating new personnel;
●
the diversion of our management's attention from our existing drug programs and initiatives in pursuing such a strategic partnership, merger or acquisition;
●
retention of key employees, the loss of key personnel and uncertainties in our ability to maintain key business relationships;
●
risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existing products or product candidates and marketing approvals; and
●
Our inability to generate revenue from acquired technology and/or products sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs.
In addition, if we undertake
acquisitions, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses and acquire intangible
assets that could result in significant future amortization expense. Moreover, we may not be able to locate suitable acquisition opportunities,
and this inability could impair our ability to grow or obtain access to technology or products that may be important to the development
of our business.
63
Our Bylaws provide that the Court of Chancery
of the State of Delaware and, to the extent enforceable, the federal district courts of the United States of America will be the exclusive
forums for substantially all disputes between us and our stockholders, which could limit our stockholders' ability to obtain a favorable
judicial forum for disputes with us or our directors, officers, or employees.
The Charter provides that,
unless we consent to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the exclusive forum for
the following types of actions or proceedings under Delaware statutory or common law:
●
any derivative action or proceeding brought on our behalf;
●
any action asserting a breach of fiduciary duty;
●
any action asserting a claim against us or any of our current or former directors, officers or other employees arising under the DGCL, the Charter, or the Bylaws;
●
any action seeking to interpret, apply, enforce or determine the validity of this Charter or our Bylaws;
●
any action as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware; and
●
any action asserting a claim against us that is governed by the internal-affairs doctrine.
This provision would not
apply to suits brought to enforce a duty or liability created by the Exchange Act. Furthermore, Section 22 of the Securities
Act creates concurrent jurisdiction for federal and state courts over all such Securities Act actions. Accordingly, both state and federal
courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent
or contrary rulings by different courts, among other considerations, the Charter further provides that, unless we consent to the selection
of an alternative forum, the federal district courts of the United States of America will be the exclusive forum for resolving any
complaint asserting a cause of action arising under the Securities Act, including all causes of action asserted against any defendant
named in such complaint. While the Delaware courts have determined that such choice of forum provisions are facially valid and several
state trial courts have enforced such provisions and required that suits asserting Securities Act claims be filed in federal court, there
is no guarantee that courts of appeal will affirm the enforceability of such provisions and a stockholder may nevertheless seek to bring
a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert
the validity and enforceability of the exclusive forum provisions of the Charter. This may require significant additional costs associated
with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those
other jurisdictions. If a court were to find either exclusive forum provision in the Charter to be inapplicable or unenforceable in an
action, we may incur further significant additional costs associated with litigating Securities Act claims in state court, or both state
and federal court, which could seriously harm our business, financial condition, results of operations, and prospects. These exclusive
forum provisions may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with
us or our directors, officers, or other employees, or could result in increased costs for a stockholder to bring a claim, particularly
if they do not reside in or near Delaware, both of which may discourage lawsuits against us and our directors, officers and other employees.
If a court were to find either exclusive forum provision in the Charter to be inapplicable or unenforceable in an action, we may incur
further significant additional costs associated with resolving the dispute in other jurisdictions, all of which could seriously harm our
business.
We will incur increased costs and demands
upon management as a result of complying with the laws and regulations affecting public companies, which could adversely affect our business,
results of operations, and financial condition.
As a public company, we are
subject to the reporting requirements of the Exchange Act, the listing standards of Nasdaq, and other applicable securities rules and
regulations. We expect that the requirements of these rules and regulations will continue to increase our legal, accounting and financial
compliance costs, make some activities more difficult, time-consuming and costly, and place significant strain on our personnel, systems
and resources. For example, the Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect
to our business and results of operations. As a result of the complexity involved in complying with the rules and regulations applicable
to public companies, our management's attention may be diverted from other business concerns, which could harm our business, results
of operations and financial condition. Although we have already hired additional employees to assist us in complying with these requirements,
we may need to hire more employees in the future or engage outside consultants, which will increase our operating expenses.
64
In addition, changing laws,
regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing
legal and financial compliance costs, and making some activities more time-consuming. These laws, regulations and standards are subject
to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve
over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance
matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest substantial resources
to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses
and a diversion of management's time and attention from business operations to compliance activities. If our efforts to comply with
new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to
their application and practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed.
We also expect that being
a public company and these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance,
and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make
it more difficult for us to attract and retain qualified members of our board of directors, particularly to serve on our audit committee
(the "Audit Committee") and compensation committee (the "Compensation Committee"), and qualified executive officers.
As a result of disclosure
of information in the filings required of a public company, our business and financial condition will become more visible, which may result
in an increased risk of threatened or actual litigation, including by competitors and other third parties. If such claims are successful,
our business and results of operations could be harmed, and even if the claims do not result in litigation or are resolved in our favor,
these claims, and the time and resources necessary to resolve them, could divert the resources of our management and harm our business,
results of operations, and financial condition.
As a result of becoming a public company,
we are obligated to develop and maintain proper and effective internal controls over financial reporting and any failure to maintain the
adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value of our common
stock.
We are required, pursuant
to Section 404, to furnish a report by management on, among other things, the effectiveness of our internal controls over financial
reporting. In 2026, five years after our IPO, we may be required to comply with auditor attestation requirements, as required by Section 404.
This will require that we incur substantial additional professional fees and internal costs to expand our accounting and finance functions
and that we expend significant management efforts.
We may identify weaknesses
in our system of internal financial and accounting controls and procedures that could result in a material misstatement of our consolidated
financial statements. Our control over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter
how well designed and operated, can provide only reasonable, not absolute, assurance that the control system's objectives will be
met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements
due to error or fraud will not occur or that all control issues and instances of fraud will be detected.
Any failure to maintain internal
control over financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations
or cash flows. If our financial statements are not accurate, investors may not have a complete understanding of our operations. If we
do not file financial statements on a timely basis as required by the SEC, we could face severe consequences. If we are unable to conclude
that its internal control over financial reporting is effective, investors may lose confidence in the accuracy and completeness of our
financial reports, the market price of our Common Stock could decline, and we could be subject to sanctions or investigations by the Nasdaq,
the SEC or other regulatory authorities. Moreover, responding to such investigations, are likely to consume a significant amount of our
management resources and cause us to incur significant legal and accounting expenses. Failure to remedy any material weakness in internal
control over financial reporting, or to maintain effective control systems, could also restrict our future access to the capital markets.
This could result in an adverse reaction in the financial markets due to a loss of confidence in the reliability of our financial statements.
65
As a public reporting company, we are subject
to filing deadlines for reports that we file pursuant to the Exchange Act, and our failure to timely file such reports may have material
adverse consequences on our business.
Following the consummation
of the Business Combination, we failed to timely file our Form 8-K with Form 10 information prior to the "staleness" date
(as determined in accordance with the applicable rules and regulations of the SEC) applicable to the financial statements that were required
by the applicable accounting requirements and other rules and regulations of the SEC to be included in such filing (including pro forma
financial information); thus, we have not remained current in our reporting requirements with the SEC since we became an SEC reporting
company on February 14, 2024. Although we have since regained status as a current filer by filing a Form 8-K/A with current financial
statements on April 1, 2024, we will not be eligible to use a registration statement on Form S-3 that would allow us to continuously incorporate
by reference our SEC reports into the registration statement, or to use "shelf" registration statements to conduct offerings,
until approximately one year from the date we regained (and maintain) status as a current filer. Until such time, if we determine to pursue
an offering, we would be required to conduct the offering on an exempt basis, such as in accordance with Rule 144A, or file a registration
statement on Form S-1. Using a Form S-1 registration statement for a public offering would likely take significantly longer than using
a registration statement on Form S-3 and increase our transaction costs, and could, to the extent we are not able to conduct offerings
using alternative methods, adversely impact our liquidity, ability to raise capital or complete acquisitions in a timely manner. The use
of Form S-1 would also prevent us from conducting offerings on a "shelf basis," limiting our flexibility as to the terms,
timing or manner of any such offering.
We cannot guarantee that
in the future our reporting will always be timely. If we are unable to satisfy SEC filing deadlines or otherwise provide disclosures of
material information on a timely basis, stockholders and potential investors in our Common Stock may have incomplete information about
our business and results of operations, which may impact their ability to make an informed investment decision, result in a reduction
in the trading price, trading volume or analyst coverage of our Common Stock or expose us to potential liability.
We could be subject to securities class
action litigation.
In the past, securities class
action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially
relevant for us because biopharmaceutical companies have experienced significant stock price volatility in recent years. If we face
such litigation, it could result in substantial costs and a diversion of management's attention and resources, which could harm
our business.
Any such negative outcome
could result in payments of substantial damages or fines, damage to our reputation or adverse changes to our business practices. Defending
against litigation is costly and time-consuming, and could divert management's attention and our resources. Furthermore, during
the course of litigation, there could be negative public announcements of the results of hearings, motions or other interim proceedings
or developments, which could have a negative effect on the market price of the our Common Stock.
Our failure to meet the continued listing
requirements of Nasdaq could result in a delisting of its securities.
On July 19, 2024, we received
the Bid Price Requirement Letter from the staff at Nasdaq notifying us that, for the 30 consecutive trading days prior to the date of
the Bid Price Requirement Letter, the closing bid price for the Common Stock has been below the minimum $1.00 per share required for continued
listing on Nasdaq set forth in Nasdaq Listing Rule 450(a)(1), which is required for continued listing of the Common Stock on Nasdaq (the
"Bid Price Requirement"). On October 23, 2024, the trading price for our Common Stock closed under $0.10 and was the tenth
consecutive trading day to do so.
On October 24, 2024, we received
a letter from the staff at Nasdaq notifying us that, because our Common Stock had a closing bid price of $0.10 or less for ten consecutive
trading days, it was no longer eligible to rely upon the 180-day cure period set forth in the Bid Price Requirement Letter. In addition,
on October 30, 2024, the Company received a letter from the staff at Nasdaq notifying the Company that it had not regained compliance
with the continued listing requirement to maintain a minimum market value of $50,000,000 for its listed securities within the 180-day
compliance period granted by Nasdaq in May 2024.
66
On July 19, 2024, we also
received a letter the MVPHS Letter from Nasdaq notifying the Company that the Market Value of Publicly Held Shares the MVPHS of the Common
Stock had been below the minimum of $15,000,000 for the last 30 consecutive business days prior to the date of the MVPHS Letter, per the
MVPHS Requirement.
Each of the Bid Price Requirement
and MVLS Requirement deficiencies results in the commencement of delisting proceedings. However, we have requested a hearing from Nasdaq
which will be held on December 17, 2024, and plan to submit a plan to regain compliance with the listing requirements at such hearing.
All other delisting actions will be stayed through the hearing decision or any time provided by the hearing panel. The panel
will issue a decision, typically within 30 days of the hearing date, either granting us an extension in which to regain compliance or
denying our request and moving to delist our securities from Nasdaq. Such a delisting would likely have a negative effect on the price
of the securities and would impair your ability to sell or purchase the securities when you wish to do so. In the event of a delisting,
any action taken by us to restore compliance with listing requirements may not allow our securities to become listed again, stabilize
the market price or improve the liquidity of our securities, prevent our securities from dropping below the Nasdaq minimum share price
requirement or prevent future non-compliance with Nasdaq's listing requirements. Additionally, if our securities are not listed
on, or become delisted from Nasdaq for any reason, and are quoted on the over-the-counter bulletin board, an inter-dealer automated quotation
system for equity securities that is not a national securities exchange, the liquidity and price of our securities may be more limited
than if we were quoted or listed on Nasdaq or another national securities exchange.
If securities or industry analysts do not
publish research, or publish inaccurate or unfavorable research, about our business, our Common Stock share price and trading volume could
decline.
The trading market for our
Common Stock will depend, in part, on the research and reports that securities or industry analysts publish about us or our business.
If few or no securities or industry analysts cover us, the trading price for our Common Stock would likely be negatively impacted. If
one or more of the analysts who cover us downgrade our Common Stock or publish inaccurate or unfavorable research about our business,
our share price would likely decline. In addition, if our operating results fail to meet the forecast of analysts, our share price would
likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our Common
Stock could decrease, which might cause our share price and trading volume to decline.
Future sales of our Common Stock, or the
perception that future sales may occur, may cause the market price of our Common Stock to decline, regardless of our operating performance.
Due to the significant number
of redemptions of Class A Common Stock, in connection with the Business Combination, there was a significantly lower number of shares
of Class A Common Stock that converted into shares of our Common Stock in connection with the Business Combination. As a result, the shares
of our Common Stock being registered for resale are anticipated to constitute a considerable percentage of our public float. Additionally,
a significant portion of the shares of our Common Stock being registered for resale were purchased by securityholders pursuant to investments
in Legacy CERo that date from February 2017 onwards at prices considerably below the current market price of our Common Stock. This discrepancy
in purchase prices may have an impact on the market perception of our Common Stock's value and could increase the volatility of
the market price of our Common Stock or result in a significant decline in the public trading price of our Common Stock. The registration
of these shares for resale creates the possibility of a significant increase in the supply of our Common Stock in the market. The increased
supply, coupled with the potential disparity in purchase prices, may lead to heightened selling pressure, which could negatively affect
the public trading price of our Common Stock.
Sales of a substantial number
of our shares of Common Stock and/or Public Warrants in the public market by our existing securityholders, or the perception that those
sales might occur, could depress the market price of our shares of Common Stock and Public Warrants and could impair our ability to raise
capital through the sale of additional equity securities. We are unable to predict the effect that such sales may have on the prevailing
market price of our shares of Common Stock and Public Warrants. Furthermore, the sale of a substantial number of shares of Common Stock
pursuant to this prospectus, or the perception that such sale may occur, may materially and adversely affect the prevailing market price
of our Common Stock and thus restrict the amount we are able to raise in an equity offering, or require us to issue and sell more Common
Stock to generate the same amount of gross proceeds than we would otherwise have had to, which would result in greater dilution to our
existing stockholders. We expect that because there is a large number of shares being registered pursuant to the registration statement
of which this prospectus forms a part, the holders thereunder will continue to offer the securities covered thereby for a significant
period of time, the precise duration of which cannot be predicted. Accordingly, the adverse market and price pressures and constraint
on our ability to raise additional capital resulting from the shares registered hereunder may continue for an extended period of time.
67
Our Warrants are exercisable for Common
Stock, the exercise of which would increase the number of shares eligible for future resale in the public market and result in dilution
to our shareholders.
As of December 16,
                                                                                                                   2024, there were 9,517,499 Common Warrants, 612,746 Series A Common Warrants and 8,175,166 Series C Warrants with an exercise price
                                                                                                                   ranging from $0.098 to $11.50 per share, which are exercisable into approximately 18,305,411 shares of Common Stock. To the extent
                                                                                                                   such warrants are exercised, additional shares of our Common Stock will be issued, which will result in dilution to the holders of
                                                                                                                   our Common Stock and increase the number of shares eligible for resale in the public market. Sales of substantial numbers of such
                                                                                                                   shares in the public market could adversely affect the market price of our Common Stock, the impact of which increases as the value
                                                                                                                   of our stock price increases.
Our Warrants may not be exercised at all
and we may not receive any cash proceeds from the exercise of the Warrants.
Holders of our Warrants will
be less likely to exercise their Warrants if the exercise prices of their Warrants exceed the market price of our Common Stock. There
is no guarantee that our Warrants will continue to be in the money prior to their expiration, and as such, the Warrants may expire worthless.
As such, any cash proceeds that we may receive in relation to the exercise of the Warrants overlying shares of Common Stock will be dependent
on the trading price of our Common Stock. There is no assurance that the holders of the Warrants will elect to exercise any or all of
such Warrants. As of the date of this prospectus (i) all of the Private Placement Warrants and Public Warrants, which have an exercise
price of $11.50 per share, (ii) all of the Rollover Warrants, which have an exercise price of $10.00 per share, and (iii) all of the Series
A Warrants, which have a current exercise price of $1.39 per share, are "out of the money," meaning the exercise price is
higher than the market price of our Common Stock. Holders of such "out of the money" Warrants are not likely to exercise such
Warrants. There can be no assurance that such Warrants will be in the money prior to their respective expiration dates, and therefore,
we may not receive any cash proceeds from the exercise of such Warrants.
Our Earnout Shares are accounted for as
liabilities and the changes in value of such shares could have a material effect on, or cause volatility in, our financial results.
We evaluated the accounting
treatment of our Earnout Shares (as defined below) subject to forfeiture if the applicable conditions to transferability thereof are not
satisfied and determined to classify such shares as liabilities measured at fair value. The fair value of such shares is remeasured on
a quarterly basis over the earn-out period with changes in the estimated fair value recorded in Other (expense) income on the condensed
consolidated statement of operations and comprehensive loss. Due to the recurring fair value measurement, we expect that we will recognize
non-cash gains or losses on our Earnout Shares each reporting period and that the amount of such gains or losses could materially impact
or cause volatility in our financial results.
68
USE OF PROCEEDS
We estimate that we will receive net proceeds
of approximately $[____] million, after deducting the placement agent fees and estimated offering expenses payable by us (based on an
assumed public offering price of $[____] per share, which was the last reported sales price of our Common Stock on the Nasdaq Global Market
on [____], 2024) and assuming no sale of any Pre-Funded Warrants and no exercise of Offered Common Warrants. However, because this is
a best efforts offering with no minimum number of securities or amount of proceeds as a condition to closing, the actual offering amount,
placement agent fees and net proceeds to us are not presently determinable and may be substantially less than the maximum amounts set
forth on the cover page of this prospectus, and we may not sell all or any of the securities we are offering. As a result, we may receive
significantly less in net proceeds. Based on the assumed offering price set forth above, we estimate that our net proceeds from the sale
of 75%, 50% or 25% of the securities offered in this offering would be approximately $[____] million, $[____] million and $[____] million,
respectively, after deducting placement agent fees and estimated offering expenses payable by us.
We currently intend to use the net proceeds from
this offering, together with our existing cash resources, toward the following activities in their order of importance:
●
advancement of our clinical programs; and
●
fund working capital and other general corporate purposes.
This expected use of net proceeds from this offering
represents our intentions based upon our current plans and business conditions. We have not determined the exact amounts we may spend
on any of the items listed above or the timing of these expenditures.
Our management will retain broad discretion over
the allocation of the net proceeds from this offering. We may find it necessary or advisable to use the net proceeds from this offering
for other purposes, and we will have broad discretion in the application of net proceeds. Although we may use a portion of the net proceeds
of this offering for the acquisition or licensing, as the case may be, of additional technologies, other assets or businesses, we have
no current understandings, agreements or commitments to do so.
69
MARKET PRICE AND DIVIDEND INFORMATION
Market Price
Our Common Stock and Public
Warrants are listed on Nasdaq under the symbols "CERO" and "CEROW," respectively.
The closing price of our
Common Stock and our Public Warrants as reported on Nasdaq on December 18, 2024 was $0.06 per share and $0.009 per warrant.
Holders
As of December 18, 2024,
there were [133] holders of record of our Common Stock and [32] holders of record of our Public Warrants. The numbers of holders of record
do not include for example a substantially greater number of "street name" holders or beneficial holders whose securities
are held of record by banks, brokers and other financial institutions.
Dividend Policy
We have not paid any cash
dividends to date. The payment of cash dividends in the future will be dependent upon our revenues and earnings, if any, capital requirements,
and general financial condition. The payment of any cash dividends will be within the discretion of our Board at such time.
70
CAPITALIZATION
The following table sets forth our cash and our
capitalization as of September 30, 2024, on:
●
an actual basis; and
●
on an as adjusted basis, giving effect to the issuance and
sale of [__] shares of Common Stock in this offering at the assumed public offering price of $ per share, which is the last reported
sale price of our Common Stock on the Nasdaq Global Market on [___], 2024, and after deducting placement agent fees and estimated offering
expenses payable by us and assuming no sale of Pre-Funded Warrants in this offering and no exercise of Offered Common Warrants.
You should read this information in conjunction
with our consolidated financial statements and the related notes included elsewhere in this prospectus, the information set forth in "
Management's
Discussion and Analysis of Financial Condition and Results of Operations
" and other financial information contained elsewhere
in this prospectus.
September 30,
2024
September 30,
2024
(Actual)
(As Adjusted)
Cash, restricted cash, and cash equivalents
$
3,380,204
$
Borrowing
102,274
Equity:
Series A Convertible Preferred stock, $0.0001 par value
1,972,727
Series B Convertible Preferred stock, $0.0001 par value
360,000
Series C Convertible Preferred stock, $0.0001 par value;
1,249,999
Class A common stock; $0.0001 par value: 147,542,572 shares outstanding, actual; [___] shares outstanding, as adjusted
14,753
Common Stock, $0.0001 par value
-
Additional paid-in capital
66,363,448
Stock subscription receivable
(2,073,607
)
Accumulated deficit
(71,589,745
)
Total stockholders' deficit
(3,702,425
)
Total capitalization
$
$
The
number of shares of Common Stock that will be outstanding after this offering is based on 147,542,572 shares of Common Stock outstanding
as of September 30, 2024, and excludes:
●
2,657,486
shares of Common Stock underlying outstanding options;
●
4,514,104 shares of Common Stock issuable under our 2016 Plan and our 2024 Plan,
which includes 4,514,104 shares of Common Stock reserved for issuance under our 2016 Plan and our 2024 Plan;
●
527,182 shares of Common Stock issuable under our 2024 ESPP, which includes 527,182 shares of Common Stock reserved for issuance under our 2024 ESPP;
●
9,517,499 shares of Common Stock issuable upon the exercise of Public Warrants and
Private Placement Warrants;
●
8,787,912 shares of Common Stock issuable upon the exercise of Common Warrants issued
in the offerings of our Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock; and
●
117,286,607 shares of Common Stock issuable upon conversion of the Series A Preferred
Stock, Series B Preferred Stock, and Series C Preferred Stock, including 39,075,000 shares issuable upon the exercise of Preferred Warrants.
71
DILUTION
If you invest in the Common
Stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the public offering
price per share of Common Stock, or Pre-Funded Warrants in lieu thereof, and accompanying Offered Common Warrants, and the as adjusted
net tangible book value per share of Common Stock immediately after this offering.
As of September 30,
                                                                                                                   2024, our historical net negative tangible book value was $(3.7) million or $(0.024) per share of Common Stock. Historical net
                                                                                                                   tangible book value per share of Common Stock represents our total tangible assets less total liabilities, divided by the number of
                                                                                                                   shares of Common Stock outstanding as September 30, 2024.
After giving effect to the
receipt of the net proceeds from our sale of Common Stock in this offering at an assumed public offering price of $[__] per share of Common
Stock, assuming no sale of Pre-Funded Warrants in this offering and no exercise of Offered Common Warrants and after deducting placement
agent fees and estimated offering expenses payable by us, our as adjusted net tangible book value as of September 30, 2024, would have
been $[__] million per share of Common Stock. This represents an immediate increase in net tangible book value of $[__] per share of Common
Stock to our existing shareholders and immediate dilution of $[__] per share of Common Stock to investors purchasing Common Stock in this
offering.
The following table illustrates this dilution
on a per share of Common Stock basis, assuming all shares of common stock outstanding as of September 30, 2024:
Assumed public offering price per share of Common Stock
$
[__]
Historical net tangible book value per share of Common Stock as of September 30, 2024
$
(0.024
)
Increase in net tangible book value per share of Common Stock attributed to investors purchasing Common Stock in this offering
As adjusted net tangible book value per share of Common Stock after this offering
Dilution in net tangible book value per share of Common Stock to investors in this offering
$
[__]
A $[__] increase or decrease
in the assumed public offering price of $[__] per share of Common Stock, based on the last reported sale price for our Common Stock as
reported on the Nasdaq Global Market on [__], 2024, would decrease the number of shares of our Common Stock offered in this offering by
approximately [__] million shares or increase the number of shares of our Common Stock offered in this offering by approximately [___]
million shares.
We may also increase or decrease
the number of shares of Common Stock we are offering. An increase of [___] in the number of shares of Common Stock offered by us would
increase our as adjusted net tangible book value by approximately $[__] million, or $[__] per share, and decrease the dilution per share
to investors participating in this offering by $[__] per share, assuming the assumed offering price per share remains the same and after
deducting the estimated placement agent commissions and estimated offering expenses payable by us. Similarly, a decrease of [____] in
the number of shares of Common Stock offered by us would decrease our as adjusted net tangible book value by approximately $[__] million
or $[__] per share, and increase the dilution per share to investors participating in this offering by $[__] per share, assuming the assumed
offering price per share remains the same and after deducting the estimated placement agent commissions and estimated offering expenses
payable by us.
If we only sell 75%, 50%
or 25% of the maximum offering amount, our as adjusted net tangible book value per share after this offering would be $[__] million, $[__]
million or $[__] million, respectively, and the immediate dilution in net tangible book value per share to new investors purchasing securities
in this offering would be $[__], $[__] or $[__], respectively, assuming no Purchase Warrants or Pre-Funded Warrants are exercised, and
after deducting Placement Agent fees and estimated offering expenses payable by us.
72
The dilution information
above is for illustration purposes only. Our as adjusted net tangible book value following the closing of this offering will depend on
the actual public offering price and other terms of this offering determined at pricing.
The number of shares of Common
Stock that will be outstanding after this offering is based on 147,542,572 shares of Common Stock outstanding as of September 30, 2024,
and excludes:
●
2,657,486 shares of Common Stock underlying outstanding options;
●
4,154,104 shares of Common Stock issuable under our 2016 Plan and our 2024 Plan,
which includes 4,154,104 shares of Common Stock reserved for issuance under our 2016 Plan and our 2024 Plan;
●
527,182 shares of Common Stock issuable under our 2024 ESPP, which includes 527,182 shares of Common Stock reserved for issuance under our 2024 ESPP;
●
9,517,499 shares of Common Stock issuable upon the exercise of Public Warrants and
Private Placement Warrants;
●
8,787,912 shares of Common Stock issuable upon the exercise of Common Warrants issued
in the offerings of our Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock; and
●
117,286,607 shares of Common Stock issuable upon conversion of the Series A Preferred
Stock, Series B Preferred Stock, and Series C Preferred Stock, including 39,075,000 shares issuable upon the exercise of Preferred Warrants.
To the extent any outstanding
options are exercised, new options or other equity awards are issued under our equity incentive plans, or we issue additional equity or
convertible securities in the future, there will be further dilution to new investors participating in this offering.
73
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION
PBAX, and after the Business
Combination, CERo, is providing the following unaudited pro forma condensed combined financial information to aid you in your analysis
of the financial aspects of the Business Combination and related transactions. The following unaudited pro forma condensed financial information
presents the combination of the financial information of PBAX and Legacy CERo adjusted to give effect to the Business Combination and
related transactions. The following unaudited pro forma condensed combined financial information has been prepared in accordance with
Article 11 of Regulation S-X as amended by the final rule, Release No. 33-10786 "Amendments to Financial Disclosures about Acquired
and Disposed Businesses."
The historical financial
information of PBAX was derived from the audited financial statements of PBAX for the year ended December 31, 2023. The historical financial
information of Legacy CERo was derived from audited financial statements of Legacy CERo for the year ended December 31, 2023. Such unaudited
pro forma financial information has been prepared on a basis consistent with the audited financial statements of PBAX and Legacy CERo,
respectively, and should be read in conjunction with the audited historical financial statements and related notes.
The unaudited pro forma condensed
combined balance sheet as of December 31, 2023, combines the historical balance sheet of PBAX and the historical balance sheet of Legacy
CERo on a pro forma basis as if the Business Combination and the related transactions contemplated by the Business Combination Agreement,
summarized below, had been consummated on December 31, 2023. The unaudited pro forma condensed combined statement of operations for the
year ended December 31, 2023 combines the historical statement of operations of PBAX and historical statement of operations of Legacy
CERo on a pro forma basis as if the Business Combination and the transactions contemplated by the Business Combination Agreement, summarized
below, had been consummated on January 1, 2023. There were no pro forma adjustments required to eliminate activities between the companies.
These unaudited pro forma
condensed combined financial statements are for informational purposes only. They do not purport to indicate the results that would have
been obtained had the Business Combination and related transactions actually been completed on the assumed date or for the period presented,
or which may be realized in the future. The pro forma adjustments are based on the information currently available and the assumptions
and estimates underlying the pro forma adjustments are described in the accompanying notes. Actual results may differ materially from
the assumptions within the accompanying unaudited pro forma condensed combined financial information.
On June 6, 2023, PBAX entered
into a Business Combination Agreement with Merger Sub and Legacy CERo, pursuant to which Merger Sub merged with and into Legacy CERo,
with Legacy CERo surviving as a wholly-owned subsidiary of the CERo. The Business Combination Agreement was amended on February 5, 2024
and again on February 13, 2024. The Business Combination closed on February 14, 2024, at which time the following occurred:
1.
Each outstanding share of Legacy CERo's convertible preferred stock (the "CERo preferred stock") was converted into the number of shares of PBAX's Class A common stock, par value $0.0001 per share (the "Class A Common Stock"), calculated by dividing the liquidation preference by $10.00.
2.
Each outstanding share of Legacy CERo's common stock (the "CERo common stock") was converted into the number of shares of Class A Common Stock calculated by multiplying each share by the exchange ratio (the "Exchange Ratio"). The Exchange Ratio of 0.064452 was calculated by first subtracting the aggregate liquidation preference of outstanding preferred shares from $50 million, then dividing the result by the number of shares of CERo common stock outstanding and dividing by $10.00 per share.
3.
Each holder of Legacy CERo common stock received a pro rata portion of up to 1.2 million earnout shares of Class A Common Stock, 1,000,000 of which are subject to vesting upon the achievement of certain stock price-based earnout targets and 200,000 of which are subject to vesting upon a change of control, respectively.
4.
Certain holders of Legacy CERo common stock received a pro rata portion of 875,000 earnout shares of Class A Common Stock, which became fully vested upon the closing of the Business Combination.
74
5.
Certain holders of the Legacy CERo's common stock received a pro rata portion of up to 1.0 million earnout shares of Class A Common Stock, which are subject to vesting upon the Company's filing an investigational new drug application with the FDA.
6.
Each outstanding Legacy CERo option was converted into an option to purchase a number of shares of Class A Common Stock, equal to the shares of Legacy CERo common stock underlying the option multiplied by the Exchange Ratio, at an exercise price per share equal to the Legacy CERo option exercise price divided by the Exchange Ratio.
7.
Each Legacy CERo warrant was converted into a warrant to acquire a number of shares of Class A Common Stock obtained by dividing the warrant as-if-exercised liquidation preference by $10.00, with the exercise price equal to the total Legacy CERo warrant exercise amount divided by the number of shares of Common Stock issuable upon exercise.
8.
The Convertible Bridge Notes automatically converted into shares of Series A Preferred Stock, at a conversion price equal to $750 per share.
CERo issued, transferred
from the Sponsor, or reserved for issuance an aggregate of 8.4 million shares of Class A Common Stock to the holders of Legacy CERo common
stock and Legacy CERo preferred stock or reserved for issuance upon exercise of Legacy CERo options or warrants as consideration in the
Business Combination. In connection with the Business Combination, PBAX changed its name to "CERo Therapeutics Holdings, Inc."
The unaudited pro forma condensed
combined financial information has been prepared using the assumptions below:
On June 4, 2023, Legacy CERo
entered into a bridge financing agreement (the "Bridge Financing") in anticipation of Legacy CERo completing the Business
Combination with PBAX pursuant to a definitive Business Combination Agreement. On June 6, 2023, Legacy CERo sold the Convertible Bridge
Notes with an aggregate principal amount of $605,230 to certain eligible participants. The Convertible Bridge Notes were automatically
converted (principal and accrued interest) upon the Business Combination into an aggregate of 628 shares of Series A Preferred Stock at
conversion rate of $1,000 per share, and all of the Convertible Bridge Notes were retired.
An additional 1,000,000 shares
of restricted Common Stock were issued to select Legacy CERo stockholders and Convertible Bridge Note investors and a corresponding 1,000,000
shares of Common Stock held by the Sponsor have been restricted. Upon the filing of an investigational new drug ("IND") application
with the FDA, the restrictions upon the shares of Common Stock issued to such Legacy CERo stockholders and Convertible Bridge Note investors
will be removed, and the shares of Common Stock held by the Sponsor will be retired. Should CERo fail to file an IND with the FDA, the
shares of Common Stock issued to such Legacy CERo stockholders and Convertible Bridge Note investors will be retired and the restrictions
on the Sponsor's Common Stock will be removed.
Of the 2,000,000 shares of
Common Stock held by Sponsor, 250,000 shares were transferred to a key investor, 875,000 shares were distributed to select Legacy CERo
stockholders and Convertible Bridge Note investors as earnout shares, and 875,000 shares being retained by the Sponsor.
CERo also issued 1,943,550
new shares of Common Stock in connection with the Business Combination, consisting of (i) 1,649,500 shares issued to select vendors in
lieu of cash payment for services provided related to the Business Combination, (ii) 175,000 shares provided to individuals as compensation
and (iii) 119,050 shares issued to Keystone as consideration for its entry into the Keystone Equity Financing.
Additionally, in February
2024, CERo consummated a private placement of 10,039 shares of Series A Preferred Stock, warrants to purchase 612,746 shares of Series
A Warrants and warrants to purchase 2,500 shares of Preferred Warrants, pursuant to the Amended and Restated Securities Purchase Agreement,
dated February 14, 2024, by and among PBAX, Legacy CERo and certain accredited investors (the "Initial Investors") for aggregate
cash proceeds to CERo of approximately $8.0 million, plus additional cash proceeds of $2.0 million on the mandatory exercise of the Preferred
Warrants on the registration of the underlying common shares. A portion of such Series A Preferred Stock was issued as consideration for
the cancellation of outstanding indebtedness or securities of PBAX or Legacy CERo, including a promissory note of PBAX and the Convertible
Bridge Notes.
75
In addition, CERo entered
into a side letter with Keystone, pursuant to which CERo agreed to make a payment of $1.0 million to Keystone, which amount reflects an
original issue discount to Keystone, and to reimburse $150,000 of legal expenses incurred thereby. In addition, the Sponsor agreed to
transfer an aggregate of 250,000 shares of Class A Common Stock to another investor as consideration for their participation in the PIPE
Financing.
On February 14, 2024, as
a condition to the closing of the PIPE Financing, CERo entered into the Old Keystone Purchase Agreement with Keystone, pursuant to which
CERo may sell and issue, and Keystone is obligated to purchase, up to the lesser of $25 million of Common Stock or a limit determined
by maximum ownership percentages (the "Keystone Equity Financing"). On February 23, 2024, CERo entered into Arena Purchase
Agreement, pursuant to which CERo may sell and issue, subsequent to the Keystone Equity Financing being terminated or fully subscribed,
and Arena is obligated to purchase, up to $25 million of Common Stock or a limit determined by maximum ownership percentages (the "Arena
Equity Financing"). Each of the Keystone Equity Financing and Arena Equity Financing is in place, but there was no accounting impact
on the date of the transaction.
The following summarizes
the pro forma ownership of Common Stock following the Business Combination
Shares
%
Public shares
(1)
82,047
0.6
%
Common shares issued to Legacy CERo stockholders
(2)
8,075,000
54.8
%
Non-Sponsor held private shares
(3)
2,378,554
23.0
%
Shares held by Sponsor
4,171,246
21.6
%
Shares outstanding
14,706,847
100.0
%
(1)
Excludes Legacy CERo warrants, which were converted into warrants to purchase approximately 325,000 shares of Common Stock.
(2)
Excludes 750,000 options granted under Legacy CERo's 2016 Equity Incentive Plan, which were converted into options to purchase 48,399 shares of Class A Common Stock.
(3)
Excludes PBAX's Public Warrants, Private Placement Warrants, and PIPE Warrants exercisable in the aggregate for 9,805,246 shares of common stock. Also excludes 1,203,500 shares of common stock underlying the conversion of 10,039 shares of Series A Preferred Stock and 626 shares of Series B Preferred Stock and the exercise and conversion of 2,500 Preferred Warrants.
The Business Combination
is being accounted for using the asset acquisition method in accordance with accounting principles generally accepted in the United States
of America ("U.S. GAAP"). Under this method of accounting, we have determined that PBAX is the accounting acquirer as PBAX
is (i) the entity issuing its own shares to consummate the Business Combination, (ii) the senior management team will primarily be comprised
of PBAX's existing management team, and (iii) PBAX's assets were significantly larger than Legacy CERo's, based on the
terms of the Business Combination Agreement. The merger is being accounted for as an asset acquisition as substantially all of the fair
value is concentrated within in-process research and development ("IPR&D"), an intangible asset. Legacy CERo's assets
(except for cash) and liabilities will be measured and recognized as an allocation of the transaction price based on their relative fair
values as of the transaction date with any value associated with IPR&D with no alternative future use being expensed.
76
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE
SHEET
AS OF DECEMBER 31, 2023
(In thousands)
As of
December 31,
2023
Phoenix
Biotech
Acquisition
Corp.
(Historical)
CERo
Therapeutics,
Inc.
(Historical)
Transaction
Accounting
Adjustments
As of
December 31,
2023
Pro Forma
Combined
(Unaudited)
(Unaudited)
(Unaudited)
(Unaudited)
ASSETS
Current assets:
Cash, restricted cash, and cash equivalents
$
96,873
$
1,601,255
911,357
B
$
8,960,705
(984,914
)
F
(250,000
)
H
7,586,134
J
Prepaid expenses and other current assets
27,426
368,780
—
396,206
Series A Preferred warrant assets
2,000,000
K
2,000,000
Money market funds held in Trust Account
8,436,311
—
(7,524,954
)
A
—
(911,357
)
B
Total current assets
8,560,610
1,970,035
826,266
11,356,911
Non-current assets:
Equipment, net
—
966,702
—
966,702
Operating lease right-of-use assets
—
2,189,565
—
2,189,565
Total non-current assets
—
3,156,267
—
3,156,267
TOTAL ASSETS
8, 560,610
5,126,302
826,266
14,513,178
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
Accounts payable
3,535,084
1,671,745
(116,065
)
F
5,090,764
Accrued liabilities
—
144,633
(27,636
)
C
116,997
Common stock subscription deposit
—
1,875
—
1,875
Operating lease liability
—
769,092
—
769,092
Short-term notes payable, net
—
599,692
(599,692
)
C
—
Income tax payable
23,633
—
—
23,633
Working capital loan – related party
1,555,000
—
(1,555,000
)
G
—
Excise tax payable
56,389
—
—
56,389
Due to affiliate
3,315
—
—
3,315
Preferred stock warrant liability
—
320,117
—
320,117
Earn-out liability
—
—
10,780,000
F
10,780,000
Total current liabilities
5,173,421
3,507,154
8,481,607
17,162,182
Non-current liabilities:
Operating lease liability, net of current portion
—
1,575,499
—
1,575,499
Derivative liabilities in Series A Preferred Stock
—
—
2,096
C
2,096,709
—
—
51,502
G
—
—
2,043,111
J
Deferred underwriting fee
9,150,000
—
(5,570,000
)
H
3,580,000
Total non-current liabilities
9,150,000
1,575,499
(3,473,291
)
7,252,208
Total liabilities
14,323,421
5,082,653
5,008,316
24,414,390
Common stock subject to possible redemption
8,436,311
—
(8,436,311
)
A
—
COMMITMENTS AND CONTINGENCIES
Convertible preferred stock:
Series Seed
—
4,077,560
(4,077,560
)
E
—
Series A
—
38,023,784
(38,023,784
)
E
—
Series A Preferred Stock
—
—
630,770
C
7,677,291
1,503,498
G
5,543,023
J
Total convertible preferred stock
—
42,101,344
(34,424,053
)
7,677,291
Stockholders' deficit:
Common stock
—
907
(907
)
D
—
Class A Common Stock
547
—
82
B
1,530
806
E
61
F
20
H
12
K
Additional paid-in capital
—
1,031,219
(7,524,954
)
A
42,321,785
8,436,229
B
(43,088,914
)
D
87,819,313
E
(10,780,000
)
F
2,961,989
G
980,000
I
2,000,000
K
486,903
L
Retained deficit
(14,199,669
)
(43,089,821
)
(5,538
)
D
(59,901,818
)
43,089,821
D
(45,718,778
)
E
(3,830,899
)
G
4,339,980
I
(486,915
)
L
Total stockholders' deficit
(14,199,122
)
(42,057,695
)
38,678,314
(17,578,503
)
TOTAL LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
$
8,560,610
$
5,126,302
$
826,266
$
14,513,178
77
UNAUDITED PRO FORMA CONDENSED COMBINED
DETAILED ADJUSTED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2023
For the Year Ended
December 31, 2023
For the
Phoenix
Biotech
Acquisition
Corp.
(Historical)
CERo
Therapeutics,
Inc.
(Historical)
Transaction
Accounting
Adjustments
Year Ended
December, 2023
Pro Forma
Combined
Operating expenses:
Research and development
$
—
$
5,288,580
$
—
$
5,288,580
General and administrative
2,892,935
2,386,469
3,830,899
AA
9,597,218
486,915
BB
Franchise tax
40,050
—
—
40,050
Total operating expenses
2,932,985
7,675,049
4,317,814
14,925,848
Loss from operations
(2,932,985
)
(7,675,049
)
(4,317,814
)
(14,925,848
)
Other income:
Interest and other income, net
491,571
385,472
(5,538
)
DD
871,505
Gain on settlement of deferred underwriting fees
—
—
4,339,980
CC
4,339,980
Expense of acquired in-process research and development
(45,101,193
)
EE
(45,101,193
)
Total other income
491,571
385,472
(40,766,750
)
(39,889,708
)
Net loss before income taxes
(2,441,414
)
(7,289,577
)
(45,084,565
)
(54,815,556
)
Income tax expense
(94,819
)
—
—
(94,819
)
Net loss attributable to common shareholders
$
(2,536,233
)
$
(7,289,577
)
$
(45,084,564
)
$
(54,910,374
)
Net loss per share (Note 4)
Basic and diluted weighted average shares outstanding, Class A Common Stock
4,224,247
9,058,025
14,706,847
Basic and diluted net loss per share
$
(0.39
)
$
(0.80
)
$
(3.73
)
Basic and diluted weighted average shares outstanding, Class B Common Stock
2,304,421
N/A
N/A
Basic and diluted net loss per share
$
(0.39
)
N/A
N/A
78
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
FINANCIAL INFORMATION
Note 1. Basis of Presentation
The Business Combination
is being accounted for as an asset acquisition in accordance with U.S. GAAP. Under this method of accounting, PBAX will be treated as
the "accounting acquirer" and Legacy CERo as the "accounting acquiree" for financial reporting purposes. Accordingly,
for accounting purposes, the Business Combination is being accounted for as an asset acquisition as substantially all of the fair value
is concentrated in IPR&D, an intangible asset. Legacy CERo's assets (except for cash) and liabilities will be measured and recognized
as an allocation of the transaction price based on their relative fair values as of the transaction date with any value associated with
IPR&D with no alternative future use being expensed. The fair value measurements utilize estimates based on key assumptions of the
Business Combination, including historical and current market data.
The unaudited pro forma adjustments
included herein are preliminary and will be adjusted as additional information becomes available and as additional analyses are performed.
The final purchase price allocation will be determined subsequent to the Merger, and the final amounts of the assets acquired, and liabilities
assumed may differ materially from the values recorded in the pro forma financial information.
The unaudited pro forma condensed
combined balance sheet as of December 31, 2023, gives effect to the Business Combination and related transactions as if they had been
completed on December 31, 2023. The unaudited pro forma condensed combined statement of operations for the year ended December 31, 2023,
gives effect to the Business Combination and related transactions as if they had been completed on January 1, 2023. These periods are
presented on the basis that PBAX is the acquirer for accounting purposes.
The pro forma adjustments
reflecting the consummation of the Business Combination and the related transaction are based on certain currently available information
and certain assumptions and methodologies that PBAX management believes are reasonable under the circumstances. The unaudited condensed
combined pro forma adjustments, which are described in the accompanying notes, may be revised as additional information becomes available
and is evaluated. Therefore, it is likely that the actual adjustments will differ from the pro forma adjustments, and it is possible that
the differences may be material. PBAX management believes that its assumptions and methodologies provide a reasonable basis for presenting
all of the significant effects of the Business Combination and the related transactions based on information available to management at
this time and that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro
forma condensed combined financial information.
The unaudited pro forma condensed
combined financial information does not give effect to any anticipated synergies, operating efficiencies, tax savings, or cost savings
that may be associated with the Business Combination. The unaudited pro forma condensed combined financial information is not necessarily
indicative of what the actual results of operations and financial position would have been had the Business Combination and related transactions
taken place on the dates indicated, nor are they indicative of the future results of operations or financial position of the post-combination
company. They should be read in conjunction with the historical financial statements and notes thereto of PBAX and Legacy CERo.
Note 2. Accounting Policies and Reclassifications
After consummation of the
Business Combination, management will perform a comprehensive review of the two entities' accounting policies. As a result of the
review, management may identify differences between the accounting policies of the two entities which, when conformed, could have a material
impact on the financial statements of the post-combination company. Based on its initial analysis, management did not identify any differences
that would have a material impact on the unaudited pro forma condensed combined financial information. As a result, the unaudited pro
forma condensed combined financial information does not assume any differences in accounting policies.
79
Note 3. Preliminary Purchase Price
The accompanying unaudited pro forma condensed
combined financial statements reflect an estimated preliminary purchase price of approximately $45,718,778 comprised of equity consideration
of approximately $39,567,500, and PBAX estimated transaction costs of $6,151,278.
The table below represents the total estimated
preliminary purchase price:
Total shares transferred (Legacy CERo Shareholders on a fully- diluted basis exclusive of Preferred Shareholders)
584,505
Value per share
(1)
$
4.90
$
2,864,074
Conversion of Convertible Preferred Stock into Class A Common Stock
Series Seed liquidation value
415,498
Series A liquidation amount
3,999,997
4,415,495
Value per share
(1)
$
4.90
$
21,635,926
Reallocation Shares
Reallocation shares
875,000
Value per share
(1)
$
4.90
$
4,287,500
Additional earnout and reallocation shares
Price and M&A earnout
1,200,000
IND filing earnout
1,000,000
2,200,000
Value per share
(1)
$
4.90
$
10,780,000
Total Share Consideration
$
39,567,500
Transaction costs
$
6,151,278
Total purchase consideration
$
45,718,778
(1)
Share consideration is calculated using a $4.90 reference price, which was the February 15, 2024 closing price of CERo Therapeutics Holdings, Inc. on the first full day of trading.
For purposes of this pro
forma analysis, the above estimated purchase price has been allocated based on the relative fair value of the preliminary estimate of
the fair value of assets and liabilities to be acquired:
Preliminary Purchase Price Allocation:
In-process research and development
$
45,101,193
Long-term assets
3,156,267
Net working capital (Excluding cash)
(2,538,682
)
Net assets acquired
$
45,718,778
The guidance in ASC 805 requires
an initial screen test to determine if substantially all of the fair value of the gross assets acquired is concentrated in a single asset
or group of similar assets. If that screen is met, the set is not a business. The initial screen test was met as PBAX determined that
substantially all of the fair value was concentrated in the acquired IPR&D. The fair value of the IPR&D was determined to be approximately
$61 million before the purchase price was allocated among the assets and liabilities acquired, as shown above.
IPR&D represents the
R&D assets of Legacy CERo which were in-process, but not yet completed, and which PBAX has the opportunity to advance. Current accounting
standards require that the fair value of IPR&D projects acquired in an asset acquisition with no alternative future use be allocated
a portion of the consideration transferred and charged to expense at the acquisition date.
80
Note 4. Adjustments to Unaudited Pro Forma Condensed Combined
Financial Information
The unaudited pro forma condensed
combined financial information has been prepared to illustrate the effect of the Business Combination and related transactions and has
been prepared for informational purposes only.
The following unaudited pro
forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X as amended by the final
rule, Release No. 33-10786 "Amendments to Financial Disclosures about Acquired and Disposed Businesses." Release No. 33-10786
replaces the existing pro forma adjustment criteria with simplified requirements to depict the accounting for the transaction ("Transaction
Accounting Adjustments") and present the reasonably estimable synergies and other transaction effects that have occurred or are
reasonably expected to occur ("Management's Adjustments"). The pro forma adjustments reflecting the consummation of
the Business Combination and related transactions are based on certain currently available information and certain estimates, assumptions
and methodologies that management believes are reasonable under the circumstances. The unaudited condensed combined pro forma adjustments,
which are described in the accompanying notes, may be revised as additional information becomes available and is evaluated. PBAX has elected
not to present Management's Adjustments and will only be presenting Transaction Accounting Adjustments in the unaudited pro forma
condensed combined financial information. There were no pro forma adjustments required to eliminate activities between the companies.
The unaudited pro forma condensed
combined financial information does not include an income tax adjustment. Upon closing of the Business Combination, it is likely that
the combined company will record a valuation allowance against the total U.S. and state deferred tax assets as the recoverability of the
tax assets is uncertain. The pro forma combined provision for income taxes does not necessarily reflect the amounts that would have resulted
had the combined company filed consolidated income tax returns during the period presented.
The pro forma basic and diluted
earnings per share amounts presented in the unaudited pro forma condensed combined statement of operations are based upon the number of
shares of Common Stock outstanding, assuming the Business Combination and related transactions occurred on the beginning of the earliest
period presented.
Adjustments to Unaudited Pro Forma Condensed Consolidated Combined
Balance Sheet:
The adjustments included
in the unaudited pro forma condensed combined balance sheet as of December 31, 2023 are as follows:
A.
Reflects
the redemption of 671,285 PBAX shares for $7,524,954, reflecting a redemption price of $11.11 per share.
B.
Reflects
the reclassification of PBAX's remaining 82,047 shares from redeemable to permanent equity and reclassification of the remaining
$911,357 from the restricted cash held in trust to cash.
C.
Reflects
the automatic conversion of $605,230 of principal and $27,636 of accrued interest into 631 shares of Series A Preferred Stock based on
the final terms of the Bridge Financing. This adjustment includes a $5,538 adjustment to retained earnings to reflect the amortization
of the remaining debt discount and $2,096 of derivative liabilities associated with the Preferred A conversion features.
D.
Reflects
the elimination of Legacy CERo's outstanding equity, exclusive of its preferred shares which is adjusted in (E), comprised of 9,068,899
shares of common stock, par value of $0.0001, accumulated deficit of $43,089,821, and a $43,088,914 decrease in additional paid-in capital.
81
E.
Reflects
the Merger Consideration (as defined in the Business Combination Agreement), including the estimated fair value of shares of Class A
Common Stock to existing Legacy CERo common stock shareholders, estimated fair value of 4,415,494 shares of Class A Common Stock to existing
convertible preferred shareholders (Note 3), estimated fair value of 875,000 shares of Class A Common Stock to existing shareholders
for reallocation shares, estimated fair value of 2,200,000 shares of Class A Common Stock to existing shareholders for earnout and reallocation
shares, and estimated transaction costs. Also reflects the elimination of Legacy CERo's Series Seed preferred stock and Series
A preferred stock at $4,077,560 and $38,023,784, respectively, an increase in additional paid-in capital of $87,819,313, as well as the
adjustment to accumulated deficit for the acquired IPR&D as follows:
December 31,
2023
Expensed IPR&D acquired (DD)
45,101,193
Long-term assets
3,156,267
Net working capital (exclusive of cash and cash equivalents)
(2,538,682
)
Total adjustments to accumulated deficit
$
45,718,778
F.
Reclassification
of the estimated fair value of the 2,200,000 earn-out shares from equity to short term liability as the shares are restricted until the
trigger events occur. CERo estimates that the trigger events are likely to occur within the year 2024.
G.
Represents
Legacy CERo's estimated transaction costs of $7.6 million, inclusive of advisory, banking, legal and other professional fees that
are expensed as a part of the Business Combination, $3.8 million of which has already been reflected within the historical financial
statements of Legacy CERo and $1.5 million of which has already been paid. PBAX recorded an additional $3.8 million additional fees related
to the transaction. PBAX negotiated Fee Modification Agreements with vendors resulting in a gain on settlement of expenses of $1.3 million
and payment in equity with a fair value of $3.0 million. PBAX paid $1.2 million in cash and has deferred the remaining amounts owed.
H.
Repayment
of PBAX working capital loan — related party. The working capital loan was converted into shares of Series A Preferred Stock at
a price of $10.00 per share, resulting in an additional issuance of 1,555 Common Stock.
I.
Represents
the settlement of PBAX's deferred underwriting fees related to its Initial Public Offering, resulting in a reduction of $5,570,000
of deferred underwriting fees owed in exchange for a $250,000 cash payment, issuance of 200,000 shares of Common Stock and further deferral
of $2.5 million. This resulted in a gain on the settlement of deferred underwriting fees and associated reduction in retained deficit
of $4.3 million.
J.
In
February 2024, CERo consummated a private placement of 10,039 shares of Series A Preferred Stock, 612,746 Series A Warrants and 2,500
Preferred Warrants pursuant to the First Securities Purchase Agreement for aggregate cash proceeds to CERo of approximately $8.0 million,
plus additional cash proceeds of $2.0 million on the mandatory exercise of the Preferred Warrants upon the registration of the underlying
shares of Common Stock. A portion of such Series A Preferred Stock was issued as consideration for the cancellation of outstanding indebtedness
or securities of the Company, including a promissory note of PBAX and CERo's convertible notes. Certain conversion features with
an estimated fair value of $315,799 and warrants to purchase 612,746 common shares for $9.20 per share granted to certain investors with
a preliminary estimated fair value of $1,727,312 are presented as derivative liabilities. Net cash proceeds was $7.6 million for purchased
shares and warrants, which resulted in $2.1 million being recorded as a warrant liability and $5.5 million recorded as Series A Preferred
stock.
K.
As
part of the PIPE Financing, CERo sold 2,500 Preferred Warrants to certain investors for an aggregate of $2.0 million. Once the underlying
shares of common stock are registered, such investors must exercise such Preferred Warrants upon written notice of CERo.
L.
As
consideration for the establishment of the Keystone Equity Financing to sell up to the lesser of 2,977,070 shares of newly issued shares
of Common Stock and (ii) the Exchange Cap of 19.99% ownership of the outstanding common stock of the Company, unless shareholders approve
a higher quantity, CERo issued 119,050 common shares with a value of $486,915 on February 15, 2024, the first full day of trading of
the combined entity. Another $250,000 of shares of Common Stock will be issued at 90 and 180 days after the effectiveness of a registration
statement filed by CERo to register such shares.
82
Adjustments to Unaudited Pro Forma Condensed Combined
Statement of Operations
The pro forma adjustments
included in the unaudited pro forma condensed combined statement of operations for the year ended December 31, 2023, are as follows:
AA.
Reflects
Legacy CERo's and PBAX's additional $3.8 million of transaction costs incurred after December 31, 2023.
BB.
Reflects
the recognition of expense associated with the fair value of the 119,050 shares of common stock paid in association with the arrangement
of the $25 million Keystone Equity Financing.
CC.
Reflects
the $4.3 million gain on settlement of transaction expenses and deferred underwriting fees.
DD.
Reflects
the amortization of the remaining debt discount related to the Convertible Bridge Notes.
EE.
Reflects
the expensing of the $45.1 million of acquired Legacy CERo in-process research and development
Note 5. Net Loss per Share
Net loss per share was calculated
using the historical weighted average shares outstanding, and the issuance of additional shares in connection with the Business Combination
and the related transactions, assuming the shares were outstanding since January 1, 2023. As the Business Combination and the related
transactions are being reflected as if they had occurred at the beginning of the period presented, the calculation of weighted average
shares outstanding for basic and diluted net loss per share assumes that the shares issuable relating to the Business Combination and
related have been outstanding for the entirety of the period presented.
The following has been prepared
to present the net loss per share at the time of the Business Combination for the year ended December 31, 2023:
Pro forma net loss
$
(54,910,374
)
Weighted average shares outstanding – basic and diluted
14,706,847
Net loss per share – basic and diluted
$
(3.73
)
Excluded securities
Private Placement Warrants
442,500
Public Warrants
8,750,000
Investor warrants
612,746
Legacy CERo warrants
324,999
Legacy CERo options
48,339
83
BUSINESS
We are an innovative immunotherapy
company advancing the development of next-generation engineered T cell therapeutics for the treatment of cancer. Our proprietary approach
to T cell engineering, which enables us to integrate certain desirable characteristics of both innate and adaptive immunity into a single
therapeutic construct, is designed to engage the body's full immune repertoire to achieve optimized cancer therapy. Our novel cellular
immunotherapy platform is designed to redirect patient-derived T cells to eliminate tumors by building in pathways that employ both cytotoxic
and phagocytic mechanisms to destroy cancer cells, creating what we refer to as CER-T cells. Our lead molecule is CER-1236, an autologous
T-cell product that targets a novel tumor antigen, TIM-4 ligand. Unlike currently approved chimeric antigen receptor ("CAR-T")
therapies which have largely been active in hematological B cell malignancies, we believe CER-1236 will be efficacious in both hematological
malignancies and solid tumors.
On November 14, 2024, the
company received notice from the FDA that the IND was cleared after being put on a brief clinical hold due to insufficient nonclinical
data to adequately judge off target toxicity. The clinical hold was lifted after additional in vitro experiments were performed which
allayed the agency's concerns.
The ability to enhance the
activity of T cells against human cancers through genetic engineering has been among the most significant advances in cancer therapy in
the last decade. One of the more promising therapeutic uses of T cells to emerge has been CAR-T cell technology. However promising
CAR-T cell therapy has been, its use has been largely limited to the treatment of certain hematological cancers due to lack of specific
tumor-associated antigens and CAR-T cells' limited ability to proliferate, traffic, and circulate in solid tumors. Curative cell
therapies for solid tumors currently do not exist, and the significance of this limitation is underscored by the prevalence of solid tumor
malignancies. The American Cancer Society estimates that solid tumor cancers accounted for more than 1.7 million of the 1.9 million
people newly diagnosed with cancer in 2022. Even in hematological malignancies with approved CAR-T cell therapies, cure rates do not exceed
60%. Nevertheless, despite such limitations, sales of CAR-T cell therapies are anticipated to grow rapidly over the next several years
and are expected to exceed $10 billion globally by 2030.
We believe that the preferential
attributes engineered into our CER-T cell therapy enables us to overcome many of the limitations which hinder the wider application of
CAR-T technology. Our CER-T cells employ a novel targeting mechanism that targets a ligand broadly expressed on tumor cells but not healthy
cells. Specifically, CER-1236 targets the TIM-4 Ligand (TIM-4-L), otherwise known as phosphatidylserine ("PS"), a critical
component of the cell's plasma membrane that has a key role in cell cycle regulation. Exposure of TIM-4-L on the outer surface of
the plasma membrane acts as an "eat-me" signal and marks abnormal, stressed and dying or dead cells for phagocytosis. The
pro-phagocytic activities of CER-T cells are designed to integrate innate immune effector functions into cytotoxic killer T cells, creating
within a single T cell the ability to directly mediate cytotoxic effects and indirectly prime other immune cells. Moreover, in preclinical
studies, we have observed that CER-1236 cells exhibit superior cross-presentation abilities compared to conventional T cells, potentially
triggering a broad complement of immune effector cells against tumors. Since externally oriented TIM-4-L is ubiquitously expressed by
numerous cancer cell types but has very limited exposure on normal healthy cells, we envision CER-1236 as having differentiated therapeutic
utility with application across a wide array of cancer types.
We have patterned the design
of our CER-T constructs based upon many of the components found in existing conventional CAR-T cell therapies, which we believe could
shorten development timelines and enhance commercial application. The processes and protocols used to genetically modify a patient's
T cells to produce CAR-T cells are already well recognized, as is the use of lentivirus in the manufacture of these therapies. Accordingly,
we have developed CER-T cell manufacturing processes that closely resemble those used to produce existing engineered CAR-T cells. We also
expect to benefit from the well-defined and recognized regulatory guidelines established by both U.S. and European regulatory authorities
related to CAR-T therapies and their use. In contrast to these attributes, we believe that other emerging CAR-based drug candidates which
involve immune effector cells other than T cells, such as CAR-NK and CAR-M therapies, are unlikely to enjoy similar benefits.
84
In preclinical studies, we
have observed CER-1236 to display attractive functional attributes, among which are:
●
target-dependent
activation, cytotoxicity, anti-tumor cytokine production, and high proliferative capacity;
●
phagocytosis
of tumor cells;
●
distinct
transcriptome, cytokine and chemokine signatures that substantiate the complementary activity of both the innate and adaptive immune
response;
●
enhanced
antigen acquisition, processing and presentation;
●
no
evidence of T cell exhaustion despite repeated challenges;
●
no
observed off-target or off-tumor toxicities;
●
expression
and maintenance of diverse T cell populations, including naïve and memory cells, likely indicative of response persistence and durability;
and
●
well
defined and scalable manufacturing protocols.
Based on the preclinical
data regarding the use of CER-1236 T cells to combat hematologic malignancies, we anticipate beginning clinical trials in the first half
of 2025. We anticipate that our initial targets will be relapsed, remitting acute myeloid leukemia ("AML") patients as well
as AML patients with measurable residual disease ("MRD") and patients with mutations in TP53, a gene mutation associated with
aggressive AML. AML is a heterogenous and aggressive hematopoietic malignancy characterized by the rapid buildup of immature myeloid cells
in the bone marrow and blood. This process results in the inhibition of normal haematopoiesis, manifesting as neutropenia, anemia, thrombocytopenia,
and the clinical features of bone marrow failure. AML accounts for 90% of all acute leukemias in adults, with an estimated 20,240 new
cases and 11,400 deaths expected in the United States in 2023. The current treatment has remained largely unchanged over several decades
with combination chemotherapy with cytarabine for 7 days and an anthracycline for 3 days ("7+3"). Newer, targeted approaches
that include multi-kinase domain inhibitors and antibody-drug conjugates are now available during induction chemotherapy for certain patients.
For patients that are sufficiently healthy and at unfavorable risk, allogeneic Hematopoietic Stem Cell Transplants ("HSCTs")
are commonly performed. Despite these interventions, there is significant unmet medical need for novel therapies, including cell therapeutic
approaches
Our Phase 1 AML clinical
trial is intended to evaluate the safety, potential therapeutic utility and applicable dose of CER-1236. The approved starting dose for
the clinical trial is sufficiently high that we expect begin to see efficacy by the second dose level cohort. Concurrent with a trial
in these hematological malignancies, we intend to expand the clinical development of CER-1236 with an additional IND submission to investigate
solid tumors such as non-small cell lung cancer ("NSCLC") and ovarian cancer. We believe that CER-1236 has the potential to
address unmet medical needs in the targeted indications, and be differentiated from currently available therapeutics by its safety, tolerability
and efficacy. Since no clinical trials of CER-1236 have commenced, none of the abovementioned statements regarding any of our products
in development are intended to be a prediction or conclusion of efficacy.
Our Strategy
Our intent is to become a
leading biopharmaceutical company focused on the capital-efficient advancement of innovative anti-cancer product candidates targeting
the unmet medical need associated with aggressive and difficult-to-treat hematological malignancies and solid tumors. To accomplish this
objective, the key elements of our strategy include:
●
Advance
the clinical development of CER-1236 for the treatment of AML patients
. Based on preclinical data generated to date related to the
use of CER-1236 to treat hematological cancers, we intend to initially target relapsed and refractory AML patients for clinical development.
These are aggressive cancers with limited treatment options. Moreover, these cancers represent a significant unmet medical need, and
to date there are no approved CAR-T cell therapies for patients diagnosed with AML. There are approximately 20,000 cases of AML, with
4,800 patients diagnosed annually in the U.S.
85
●
Leverage
past and current CAR-T product approvals to shorten the regulatory and manufacturing pathway for CER-1236
. We have designed our CER-T
cells to share similar construction to currently approved CAR-T cell therapies. The processes and protocols used to produce autologous
CAR-T cells are well recognized, and we expect to benefit from the well-defined regulatory guidelines established by both U.S. and European
regulatory authorities related to CAR-T cell therapy manufacture. Accordingly, we have configured CER-T cell manufacturing processes
to share similarities with those employed in the production of CAR-T cells.
●
Expand
CER-1236 development activities to target solid tumors
. We intend to expand the clinical development of CER-1236 to include solid
tumors. To this end, we plan on evaluating the potential therapeutic utility of CER-1236 to treat NSCLC and ovarian cancer, indications
for which efficacious treatments have proven elusive. We believe CER-1236's differentiated mechanism of action enables the enhanced
activity of a broader contingent of immune effector cells, which may allow CER-1236 to achieve success treating cancers for which currently
approved CAR-T cell therapies have demonstrated little clinical benefit.
The Immune System and its Function
The immune system is a host
defense system comprising multiple structures and processes within an organism that protects against disease. As with other mammalian
species, the human immune system is segregated into two separate yet interconnected components, the innate immune system and the adaptive
immune system. The innate immune system is responsible for an immediate, non-specific response to infected or diseased cells. Triggering
its activation are pathogen-associated and damage-associated molecular patterns recognized by preconfigured pattern recognition receptors
which reside on the surface of various types of leukocytes, or white blood cells, that make up the innate immune system, including macrophages,
dendritic cells, eosinophils and natural killer ("NK") cells. In addition to its direct participation in eliminating damaged
or diseased cells, certain components of the innate immune system function significantly as antigen-presenting cells ("APCs")
promoting the activity of the adaptive immune system.
The adaptive immune system
is composed of special types of leukocytes known as T and B lymphocytes, also known as T and B cells, respectively. T cells participate
primarily in the cell-mediated immune response while B cells are involved in the humoral immune response. T cells are an essential
component of the adaptive immune system, targeting specific antigens and either destroying targeted cells directly or participating in
their destruction by activating other immune cells. T cells use T cell specific receptors to recognize antigens presented via major histocompatibility
complex ("MHC") molecules on APCs. Through this mechanism, T cells have the ability to target tumor-transformed or virus infected
cells, as well as help coordinate the activity of other immune cells.
T cells are differentiated
by the expression of protein markers on their surface. The two most prominent types of T cells are those that express CD8 molecules
and are known as CD8 T cells, and those that express CD4 molecules and are known as CD4 T cells. CD8 T cells, also referred to as cytotoxic
lymphocytes ("CTLs"), eliminate cells which they encounter that are recognized as being infected with viruses or other pathogens
or are otherwise damaged or dysfunctional through a process referred to as cell lysis, which involves the release by these killer T cells
of perforins and granzymes to compromise the integrity of the target cell's membrane. Endogenous pathogens are broken down by mechanisms
present in virtually all cells into smaller fragments and presented to CD8 T cells in combination with an MHC class I molecule. CD4
T cells, also referred to as T helper cells, have limited cytotoxic activity and typically do not kill infected or dysfunctional cells
or eliminate pathogens directly. Instead, they participate in the immune response by providing signals which activate and orchestrate
other types of immune cells to perform these tasks. Professional APCs, such as dendritic cells and macrophages, process exogenous pathogens
and then present small fragments of the degraded pathogen to CD4 T cells in combination with an MHC class II molecule, through a
phenomenon known as cross-presentation, while antigens of exogenous origin are coupled with an MHC Class I molecule to amplify CD8
T cell activity. Antigen cross presentation is of particular importance in the immune system's response to cancer.
86
Genetically Engineered T Cells
The ability to enhance the
activity of T cells against human cancers through genetic engineering has been among the most significant advances in cancer therapy in
the last decade. Advances in understanding T cells and their role in immunology, and an appreciation of their potential use to treat cancer,
has increased interest in the clinical application of T cells in recent years, with the field of adoptive immunotherapy attaining
increased prominence as a means of enhancing immune control over tumors. Modern molecular biological techniques allow scientists to introduce
genes into human T cells that enhance T cell activity, expand their numbers and infuse them back into the patient from whom they were
originally collected. We have developed a novel approach to T cell engineering which has enabled us to integrate certain desirable characteristics
of both the innate immune system and the adaptive immune system into a single therapeutic construct intended to optimize cancer therapy.
This novel cellular immunotherapy platform is designed to redirect T cells to eliminate tumors by building in engulfment pathways that
employ phagocytic programs, creating our CER-T cell therapy.
Phagocytosis is a vital cellular
process by which a phagocytic cell engulfs and internalizes a target for elimination and is a major mechanism for the removal of pathogens
and unwanted cells to maintain tissue homeostasis. The human body removes billions of cells daily through phagocytic processes. Phagocytic
removal employs specific cell clearance programs and machinery to eliminate target cells. The process is a crucial part of the innate
immune system and is distinct from the adaptive immune response which involves the generation of cytotoxic T cells to elicit antigen-specific,
cytolytic target elimination. Compared to traditional CAR-T cell approaches, which largely target the adaptive immune system, we developed
CER-T cell therapy to collaboratively mediate both cytotoxic and phagocytic mechanisms to optimize anti-tumor function. By leveraging
both immune responses, we believe CER-T cell therapy has the potential to eliminate cancer cells more effectively and with fewer side
effects than traditional CAR-T cell therapies.
The recognition of phagocytosis
as a therapeutic modality to directly clear cancer cells and initiate anti-tumor T cell immune responses has fueled interest in effectively
engaging phagocytes for use in cancer therapy. Macrophage cell engineering and macrophage-targeting approaches that enhance cytotoxic,
phagocytic and cytokine-mediated anti-tumor function are in development. Early clinical trial data from therapeutic candidates targeting
myeloid inhibitor function has demonstrated the potential to elicit clinical responses. However, the diverse pro-tumor functions of myelo-monocytic
cells may offset these efforts by supporting cancer cell survival, proliferation and the release of factors that may impede anti-tumor
immune responses. Limited in vivo proliferation and manufacturing challenges have also been hurdles in the development of macrophage-based
cellular therapy.
Experimental evidence demonstrates
the ability of CER-T cells to engulf targeted cells, employ cytolytic and non-cytolytic killing mechanisms, and exhibit pro-inflammatory
and antigen processing capabilities that augment the current capabilities of T cell immunotherapy. To that end, we believe CER-1236 cell
therapy, if approved, may become a component of standard of care treatment regimens, used as a monotherapy or in combination with both
small molecule therapeutics and biologics to direct robust tumor elimination.
The Increasing Prominence of CAR-T Technology
Immunotherapy is a treatment
that harnesses the components and mechanics of the immune system to address diseases and disorders. Cellular immunotherapy is a form of
immunotherapy that focuses on modulating or enhancing the activity of different immune cells. One of the more prominent and promising
therapeutic uses of T-cells to emerge has been CAR-T cell technology.
CAR-T therapy recognizes
specific antigens that are present on the surface of tumor cells and destroys them. The concept of CAR-T builds upon the normal biology
of CTLs, whereby naturally occurring receptors serve to activate these cells when a foreign pathogen or cancerous cell is detected. Conventional
CAR-T cell therapy involves the genetic manipulation of a patient's T cells to enable these modified cells to express a receptor
designed to bind to a specific surface antigen. To engineer these cells, a fraction of a patient's T cells are collected from their
blood, and a viral vector containing the genetic instructions for the CAR is used to insert those genes into the genome of the T cell
through a process known as transduction. Contained in a single viral vector are the genes encoding for each component of the CAR. Typical
CAR-T cells include the following components:
●
Antigen
recognition domain
. At one end of the CAR is a binding domain that is specific to a targeted antigen. This domain is exposed to the
outside of the engineered lymphocyte, where it can recognize the target antigen or antigens. The extracellular target binding domain
of CAR-T therapies currently approved by the FDA typically use a single-chain variable fragment ("scFv"), consisting of the
heavy-chain and light-chain variable regions of an antibody.
87
●
Extracellular
hinge domain
. The hinge domain is a small structural component which extends from the outer cell membrane to the antigen recognition
domain and provides conformational flexibility to facilitate optimal binding of the antigen recognition domain to the targeted antigen
on the surface of the cancer cell.
●
Transmembrane
domain
. This middle portion of the CAR links the antigen recognition domain to the activating elements inside the cell. The transmembrane
domain anchors the CAR in the lymphocyte's membrane, bridging the extracellular hinge and antigen recognition domains with the
intracellular signaling domain and provides critical stability to the CAR. In addition, the transmembrane domain may also interact with
other transmembrane proteins that enhance CAR function.
●
Intracellular
signaling domain
. The other end of the CAR, inside the T cell, is connected to two or more contiguous domains responsible for activating
the lymphocyte when the CAR binds to its target antigen. The first, found in almost all CAR constructs, is called CD3ξ. The CD3ξ
domain delivers an essential primary signal within the T cell and is the natural basis for activation of these lymphocytes. The current
generation of CAR-T configurations generally employ one or more costimulatory domains, such as CD28, to provide enhanced activation signals
and augment lymphocyte activity. Together, these signals result in the proliferation of the CAR-enabled T cells and selective cellular
destruction. In addition, activated CAR-T cells stimulate the local secretion of cytokines and other molecules that can recruit and activate
additional immune cells to increase target elimination.
The assembly of these core
CAR components is depicted in the schematic presented below to which certain non-coding regulatory sequences may be used to augment viral
gene expression.
Delivery of conventional CAR-T cell therapies involves a single
viral vector.
88
Conventional CAR-T cell therapies often utilize a lentiviral vector
for the delivery of CAR specific genes. Lentiviral particles offer a well-characterized transduction mechanism and are recognized as efficient
and convenient vehicles for gene transfer as they demonstrate broad tropism, or activity, in a wide array of cell types, and can be used
to target quiescent, or non-dividing, cells. In addition, they do not integrate close to the promoter regions of genes with the frequency
of other gene delivery alternatives and lack the immunogenicity of DNA-based vectors, characteristics which provide for enhanced safety.
The use of a lentiviral vector to facilitate ex vivo clinical gene transfer has been demonstrated to be safe in humans for two decades
with minimal genotoxicity observed in hundreds of patients following gene transfer into T cells or hematopoietic progenitor cells.
Currently, six CAR-T cell
therapies have been approved by the FDA for the treatment of certain types of hematological cancers. The first two, approved in 2017,
are axicabtagene ciloleucel, sold by Gilead Sciences under the brand name Yescarta, and tisagenlecleucel, sold by Novartis under the brand
name Kymriah. A third CAR-T cell therapy, brexucabtagene autoleucel, which is comparable to Yescarta and sold by Gilead under the tradename
Tecartus, was approved in 2020. Lisocabtagene matraleucel, sold by Bristol Myers Squibb under the brand name Breyanzi, received FDA approval
in February 2021 with Bristol Myers Squibb also receiving approval for idecabtagene vicleucel, sold under the tradename Abecma, in
March of that year. Most recently, Janssen Biotech received FDA approval for ciltacabtagene autoleucel, brand name Carvykti, to treat
adult patients with relapsed or refractory multiple myeloma and which targets the BCMA protein expressed on cancer cells rather than CD19,
the target of the other approved CAR-T cell therapies. Each of these therapies is an autologous therapy and is made from T cells first
collected from the patient, which are then genetically modified and administered back to the same patient. Sales of CAR-T cell therapies
are anticipated to grow rapidly over the next several years and are expected to exceed $10 billion by 2030. CAR-constructs incorporating
alternate immune effector cell types, including NK cells and macrophages, are in earlier stages of clinical development and have only
recently entered clinical trials. To date, no CAR-based therapies that employ NK cells or macrophages have received FDA approval. There
are at present no FDA approved CAR T cell products for AML.
The Limitations of Current CAR-T Technology
Much of the excitement of
cellular therapy surrounds the curative potential of adoptive transfer of genetically engineered T cells. Adoptively transferred T cells
proliferate upon their engagement with target antigens and represent a form of therapy that can be appropriately characterized as living
and expanding. Efficient targeted killing and tumor elimination may be achieved in a short period of time. However, multiple barriers
limit the efficacy of conventional CAR-T cell therapy. A high rate of side effects often accompany treatment with currently approved products,
especially in those patients with high tumor burdens. In addition, partial responses occur, often associated with immune escape of the
tumor from the CAR or the display by the T cells of an exhaustion phenotype. Moreover, while engineered CAR-T cells have shown remarkable
potential in the treatment of hematological cancers, they have not demonstrated equivalent efficacy in the treatment of solid tumors.
Curative cell therapies for solid tumors currently do not exist and the importance of this limitation is underscored by the prevalence
of solid tumor malignances. The American Cancer Society estimates that solid tumor cancers accounted for more than 1.7 million of
the 1.9 million people newly diagnosed with cancer in 2021. Even in hematological malignancies with approved CAR-T cell therapies,
less toxic orthogonal treatment approaches are needed as cure rates for CD19-targeted CAR-T cell therapies do not exceed 60%.
Challenges to the use of
cellular therapy to address solid tumors often relate to difficulty in developing receptors directed towards targets expressed in high
frequency on cancer cells as well as overcoming the immunosuppressive microenvironments that contribute to ineffective immune responses.
The tumor stroma, made up of a dense fibrotic matrix, often surrounds solid tumors and acts as a physical barrier, which restricts CAR-T
cell access to the tumor. CAR-T cell activity may be further hindered by the tumor microenvironment ("TME"). In the TME, multiple
cell types which drive immunosuppression infiltrate solid tumors, including myeloid-derived suppressor cells, tumor-associated macrophages,
and regulatory T cells. The interaction of these cells and the tumor cells increases the expression of signaling molecules that enable
tumor cell proliferation while dampening the generation of co-stimulatory signals necessary for T cell expansion and persistence. In addition,
TME-associated immune dysfunction may result in a down regulation of MHC class I molecules, limiting proper antigen presentation
and T cell proliferation. Collectively, these attributes of solid tumors enable them to avoid normal immune surveillance. Increased engagement
of the endogenous host response is an important, if not critical, component of CAR-T cell therapy clinical success as the recruitment
into the tumor of bystander lymphocytes has been observed in tumor biopsies from patients with curative CAR-T cell therapy. Enhancing
the host's own response to tumor cells offers an important opportunity to improve current CAR T cell responses.
89
CAR-T recipients may also
incur serious adverse events ("SAEs"), perhaps the most prominent of which is cytokine release syndrome ("CRS"). Believed
to be related to the rapid proliferation and activation of T cells upon detection of a target antigen, severe or life-threatening CRS
was noted in a significant number of patients who participated in the registrational trials of FDA-approved CAR-T therapies. These SAEs
can result in patients requiring longer hospitalizations and more intensive medical care. The frequency and severity of observed SAEs
is one of the primary reasons that administration of currently approved CAR-T therapy is restricted to a select number of treatment centers.
Moreover, aside from the low-level expression of certain cancer specific neoantigens, most tumor associated antigens are also found on
normal cells which may lead to serious, if not life threatening, "on-target, off-tumor" toxicities.
We believe that the preferential
attributes engineered into our CER-T cell therapies have the potential to represent a next-generation adoptive cellular immunotherapy
approach and enable us to overcome many of the limitations which hinder the wider application of current CAR-T technology. The prophagocytic
and immunomodulatory properties of CER-T cells are designed to overcome some of the immunosuppressive elements in many solid tumors. In
addition, their anticipated superior antigen presentation properties may enhance a patient's ongoing immune response against tumor
antigens. Lastly, healthy cells have minimal expression of TIM-4 ligand as compared to tumor cells, reducing the potential for on-target
off-tumor effects. In consequence, we envision CER-1236 as having a differentiated mechanism for tumor clearance that enables the potential
for enhanced activity across a broad array of hematological malignancies and solid tumors.
CER-T Cell Therapy Technology
Distinguishing our CER-1236
cell therapy candidate is the integration into a single therapeutic construct of many of the anti-tumor capabilities resident in both
the innate and the adaptive immune systems. We believe the coupling of these functions better emulates normal immune system activity which
may promote enhanced T cell activation, proliferation and durability for more robust elimination of cancerous cells and reduction in tumor
burden.
We have designed our CER-T
constructs to embrace many of the components found in conventional CAR-T cell therapies. The processes and protocols used to genetically
modify a patient's T cells to produce CAR-T cells are well recognized, as is the use of lentivirus in the manufacture of these therapies.
Accordingly, we have constructed CER-1236 cell manufacturing processes to be similar to those of CAR-T cells. We expect to benefit from
the well-defined regulatory guidelines established by both U.S. and European regulatory authorities related to CAR-T cell therapy
and its use.
The biological foundations for CER-T cell therapy
PS, or TIM-4 ligand, is a
component of a cell's plasma membrane and has a key role in cell removal. Under normal physiological conditions, TIM-4-L is restricted
to the inner leaflet of the phospholipid bilayer which makes up the plasma membrane of a cell. However, cellular stresses cause the externalization
of TIM-4-L to the cell surface. Exposure of TIM-4-L on the outer surface acts as an "eat-me" signal and marks abnormal, stressed
and dying or dead cells for phagocytic clearance. A variety of tumors have been shown to have constitutively increased surface TIM-4-L
as a result of altered plasma membrane regulation. Among hematologic tumors, loss-of-function mutations in the flippase chaperone transmembrane
protein 30A ("TMEM30A"), have been identified in approximately 5% to 11% of patients with diffuse large B cell lymphoma ("DLBCL")
and among a cohort of newly diagnosed patients, this mutation was correlated with improved response to the standard therapeutic regimen
suggesting the host's immune elimination of TIM-4-L positive tumor cells enhances tumor clearance. We are seeking to exploit the
presence of TIM-4-L expressed on the outer cell surface of both hematological malignancies and solid tumors.
90
CER-1236: Our Lead Development Candidate
As externally oriented TIM-4-L
is present on many cancerous cells regardless of tumor type, we believe a single CER construct may demonstrate clinical utility in treating
an array of cancers. To that end, we have focused our development activities on optimizing the cancer killing capabilities of a specific
CER-T therapeutic design. These efforts have resulted in our lead clinical candidate, CER-1236. In preclinical studies, we have observed
CER-1236 to display attractive functional capabilities and product characteristics, among which are:
●
target-dependent
activation, cytotoxicity, anti-tumor cytokine production, and high proliferative capacity;
●
tumor
cell phagocytosis;
●
distinct
transcriptome, cytokine and chemokine signatures that substantiate the complementary activity of both the innate and adaptive immune
response;
●
enhanced
antigen acquisition, processing and presentation;
●
no
evidence of T cell exhaustion despite repeated challenges;
●
no
observed off-target or off-tumor toxicities;
●
expression
and maintenance of diverse T cell populations, including naïve and memory cells, likely indicative of response persistence and durability;
and
●
well
defined and scalable manufacturing protocols.
We have designed CER-1236
to align with components included in the current generation of conventional CAR-T configurations by fusing the external domain of TIM-4,
a phagocytic receptor, with intracellular signaling domains from T cells and innate immune cells. TIM-4 harbors endogenous phagocytic
capacity through its binding to the pro-phagocytic "eat-me" signal TIM-4-L. CER-1236's intracellular signaling
domains, including TLR2, CD28 and CD3ξ motifs, are designed to augment both TIM-4 mediated phagocytosis and cytotoxic T cell function.
Another similarity between conventional CAR-T therapeutic formats and our CER-T design is the delivery vehicle used in transduction. As
is found in many approved CAR-T therapies, our CER-T technology also employs a lentiviral vector to facilitate gene delivery to patient-derived
T cells. A schematic of the structural elements of CER-1236 is presented below.
Schematic of CER-1236
Abbreviations: TIM-4 = ectodomain
of the T cell immunoglobulin mucin domain protein 4; TLR2 = toll-like receptor 2.
CER-1236 employs an innovative mechanism of
action
CER-1236 is an autologous
T cell therapy candidate designed to target TIM-4-L through the external domain of the prophagocytic receptor TIM-4 protein. This therapeutic
construct was developed to combine adaptive T cell killing activity with phagocytic clearance and antigen presentation activity to create
T cells with enhanced cancer immunotherapy capabilities. The approach builds on the early success of adoptive T cell transfer, which has
demonstrated the ability of T cells to proliferate, traffic, and circulate within both primary and metastatic tumors.
By enhancing phagocytic clearance
and antigen presentation activity and integrating them into T cells, we believe CER-T cells offer the potential for more effective elimination
of cancer cells. The industry's decades-long experience with engineered T cell use provides a solid foundation for the development
of CER-1236.
91
As the target ligand of our
initial CER-T cell is not an antigen restricted to only certain tumors, CER-1236 T cells may provide clinical benefit across multiple
tumor types. The functional interaction of CER-1236 T cells is depicted in the illustration presented below.
CER-1236 T cells are designed to harness the
power of both the innate and adaptive immune systems
CER-1236 expresses
the external domain of the prophagocytic receptor TIM-4 which is linked to T cell and innate immune cell intracellular signaling domains.
TIM-4 is normally expressed on subsets of macrophages and dendritic cells and harbors endogenous phagocytic capacity through its binding
to and recognition of TIM-4-L. The intracellular signaling domains in CER-1236 are designed to trigger T cell cytotoxic function
and enhance TIM-4 mediated phagocytosis. CD3ξ is the signaling component of the TCR and CD28 is a co-stimulatory domain needed for
optimal activation. The TLR2 domain is involved in both innate and adaptive immune responses and activation of TLR2 further enhances
signaling through both NF-κB and the mitogen-activated protein ("MAP") kinase family, promoting T cell activity and
phagocytic uptake. Both CD28 and CD3ξ signaling domains are incorporated into approved CAR-T cell products. A third generation anti-CD19
CAR-T cell that incorporates a TLR2 domain is currently in clinical development.
92
By virtue of the TIM-4 engulfment
receptor and the intracellular signaling domains, CER-1236 combines attributes of both T cells and phagocytic cells. In phagocytic cells,
such as macrophages and dendritic cells, recognition of TIM-4 ligand on the surface of apoptotic cells by native TIM-4 leads internalization
by utilizing integrin coreceptors to activate phagocytic signaling. TIM-4-mediated phagocytosis depends on activation of the RAC1 GTPase
which is similarly targeted by TLR signaling, especially TLR9 and TLR2. However, it has been shown that the intracellular portion of TIM-4
is not required for phagocytosis, and therefore the extracellular domain ("ECD") of TIM-4 appears to function as a tether
during phagocytosis to allow intracellular signaling by other transmembrane phagocytic molecules with which it associates, such as the
integrins which are expressed ubiquitously on T cells. Since CER-1236 contains only the ECD of TIM-4, binding to TIM-4-L on tumor cells
recruits the cell-surface phagocytosis machinery, and simultaneously directly activates CER-1236 T cells through the intracellular CD3ξ
and CD28 costimulatory domains. Phagocytosis and cytokine secretion are further enhanced by the TLR2 intracellular signaling domain.
In preclinical studies, CER-1236 empowers T
cells with phagocytic and cytotoxic potency
In an
in vitro
evaluation
of the phagocytic potential of CER-1236, CER-transduced T cells demonstrated robust phagocytosis of TIM-4-L. CER-1236 T cells were
produced by transducing donor T cells using a lentiviral vector encoding for the chimeric receptor CER-1236, yielding a high percentage
of T cells expressing the TIM-4 receptor, in similar CD4:CD8 ratios to untransduced cells. CER-1251 T cells, which express matching intracellular
signaling domains but are unable to bind to TIM-4-L due to a mutation in the gene encoding for the TIM-4 binding site, were also produced
as a negative control.
TIM-4-L-coated agarose beads
were prelabeled with pHrodo red, a pH-sensitive dye which displays limited fluorescence at neutral pH but generates significant fluorescence
in acidic pH. The post-phagocytic fusion of phagosomes and lysosomes leads to a drop in pH which can be detected by pH-sensitive
dyes. As is illustrated in the graphic below, CER-1236 T cells co-cultured with TIM-4-L-coated beads displayed significant phagocytic
activity with up to 60% of CER-T cells acquiring a pHrodo red signal, indicative of bead capture and internalization. By contrast, untransduced
T cells and CER-1251 T cells, with a mutation in the TIM-4 binding site, demonstrated minimal phagocytosis.
CER-1236 displays robust, target-specific phagocytic activity
93
Gene expression patterns
demonstrate the combined cytotoxic and phagocytic functions of CER-1236 T cells. RNA-sequencing enables the interrogation of the transcriptional
profile of CER-1236 T cells after stimulation with TIM-4-L, with defined separation between the CER-1236 activated cells and the untransduced
and CER-1251 control T cells. As shown in the gene expression profile below, over 1,700 genes were noted to be differentially expressed
in CER-1236 stimulated T cells in comparison to CER-1251 stimulated T cells. Among these genes were those related to pathways with well-known
involvement in regulating phagocytosis, genes involved in nucleation of the ARP-WASP complex, Rho family GTPases, RAC signaling and phagosome
formation. Of note, the RhoG subfamily of GTPase has been previously implicated in TCR-driven phagocytic processes. This aggregate of
transcriptional signatures is indicative of the multi-modal immune response elicited by CER-1236 T cells.
Phagocytic and cytotoxic transcriptional signatures demonstrate
the plasticity of CER-1236 T cells
94
95
CER-1236 T cells were also
observed to generate potent anti-cancer responses in cell lines derived from specific hematological malignancies and solid tumors. A mantle
cell lymphoma ("MCL") cell line that has been modified to constitutively express externalized cell surface TIM-4-L was co-cultured
with either CER-1236 T cells or untransduced T cells. Notably, CER-1236 T cells eliminated 87% of the MCL cells while the untransduced
cells demonstrated minimal cytotoxic ability. In addition, CER-1236 T cells secreted multiple cytokines, including IFNγ, granzyme
B and TNFα, all indicative of robust and sustained T cell cytotoxicity. Cytokine secretion was determined to be dependent of binding
to TIM-4-L, as CER-1251 T cells did not secrete cytokines despite exposure to cell surface TIM-4-L. Further visual evidence of the
cancer-killing capacity of CER-1236 T cells is illustrated in the staining assays depicted in the graphs presented below. In the assays
with no CER-1236 T cells, significant proliferation of cancer cells was observed, as evidenced by the increase in red staining, while
the growth of cancer cells when exposed to CER-1236 T cells was limited. These results are presented in the graph to the left below.
CER-1236 T cells demonstrate potent cytotoxic responses to cancer
cells in vitro
Significant cytotoxic activity
of CER-1236 was also noted in an advanced NSCLC cell line, HCC827, which has a mutation in its epidermal growth factor receptor ("EGFR")
gene, a cancer type accounting for between 10% and 15% of all lung adenocarcinoma cases in persons of European descent and higher among
the Asian population. As is depicted in the above, right graph, while the addition of CER-1236 demonstrates moderate cancer cell killing
activity, the addition of osimertinib, the preferred tyrosine kinase inhibitor option for first-line treatment of EGFR-mutation positive
advanced NSCLC, substantially enhanced CER-1236 T cell killing in an Osimertinib concentration dependent manner. In contrast, HCC827 cells
co-cultured with untransduced T cells displayed minimal changes in cell number as compared to cells incubated in the absence of T cells,
at all drug concentrations tested. Conditional cytokine proliferation was also observed with CER-1236 T cell treatment, with IFNγ
levels over 400-fold higher in cancer cell cultures which used CER-1236 T cells, in contrast to co-cultures which used untransduced T
cells. The addition of osimertinib to co-cultures further increased IFNγ levels by more than two-fold, compared with CER-1236 treatment
alone. Similar trends were observed with TNFα and Granzyme B levels and increases in osimertinib concentrations led to dose-dependent
CER-1236 T cell proliferation. These results demonstrated that CER-1236 T cell activity could be significantly enhanced by upregulating
target expression through concomitant dosing of standard of care medication.
TIM-4-L, a lipid moiety recognized
by phagocytic cells as an "eat me" signal, has previously been shown to be aberrantly upregulated on acute promyelocytic ("APL")
blasts, a subset of AML. To further interrogate TIM-4-L across other AML subtypes, we evaluated a panel of primary bone marrow samples
and peripheral blood from AML patients. We screened a preliminary panel of primary, treatment-naïve or on-therapy AML bone marrow
and PBMC samples by flow cytometry: (n=5 adverse, n=5 intermediate, n=1 APL, n=1 familial, n=5 N/A) (Table 1). We observed both high percent
(35.5 % ± 21.6) and geometric mean fluorescence index ("gMFI") of cell surface TIM-4-L on a range of AML bone marrow
samples. The median gMFI of tertiles 1-3 was: T1 n=7, gMFI = 5033; T2 n=8, gMFI = 1873; T3 n=8, gMFI = 611. Of note, the two on-therapy
samples showed high percent and gMFI of cell surface TIM-4-L, with a patient receiving 5-azacytidine showing 1.8 fold TIM-4-L gMFI over
median. The second patient receiving TKI therapy showed 3.3 fold TIM-4-L gMFI over median. Healthy donor samples had much lower cell surface
TIM-4-L, with a mean gMFI of 582. Circulating AML leukemic blasts were also evaluated for cell surface TIM-4-L and showed high concordance
with BM blasts, with high levels of cell surface TIM-4-L compared to healthy donor peripheral blood mononuclear cells ("PBMCs").
96
Table 1. AML patient characteristics
Patient:
Patient ID
Treatment Status: Disease Status
Previous Treatments
Patient Age At Collection
Gender
Race
Patient:
Ethnicity
% Blast Cells
Risk Category
Genetic Abnormality
Cytogenetics
200001107
Newly Diagnosed
none
67
Female
White
Non-
Hispanic/Latino
91
Adverse
RUNX1
N/A
200015767
Newly Diagnosed
none
59
Female
White
Non-
Hispanic/Latino
35
Adverse
TP53
N/A
200013141
Newly Diagnosed
none
69
Male
White
Non-
Hispanic/Latino
75
Intermediate
VAF ASXL1 < 50%
N/A
200015300
Newly Diagnosed
none
59
Male
White
93.03
N/A
200018491
Newly Diagnosed
none
62
Female
White
Non-
Hispanic/Latino
30
Adverse
TP53
N/A
130802218
Newly Diagnosed
none
71
Male
White
94.77
N/A
200018493
Newly Diagnosed
none
48
Male
White
Non-
Hispanic/Latino
82
Adverse
ASXL1, FLT3-ITD
N/A
200015400
Newly Diagnosed
none
51
Male
White
Non-
Hispanic/Latino
80.2
Familial
GATA2 Deficiency
N/A
130776684
Newly Diagnosed
none
38
Female
White
89.78
N/A
200055487
Newly Diagnosed
none
74
Male
White
80.9
N/A
130781611
Newly Diagnosed
none
62
Female
White
81.67
Intermediate
N/A
Normal
200015406
Newly Diagnosed
none
43
Male
White
91.37
Adverse
FLT-3 ITD
N/A
200036152
Newly Diagnosed
none
85
Female
White
70.13
200015557
Newly Diagnosed
none
69
Female
White
Non-
Hispanic/Latino
84
Intermediate
DNMT3A
N/A
200019235
Stable
Azacitidine 8 cycles
71
Female
White
72.63
Intermediate
N/A
N/A
200018645
Newly Diagnosed
none
41
Male
White
76.54
APL
N/A
t(15;17)
200015508
Progressive
Imatinib 400 mg.
63
Female
White
Non-
Hispanic/Latino
50
Intermediate
VAF < 50%
N/A
200019095
Newly Diagnosed
none
63
Female
White
82.65
200013114
Newly Diagnosed
none
83
Male
White
56.8
NRAS
130800395
Newly Diagnosed
none
72
Female
White
75.7
Adverse
TET2, ASXL1, TP53
200015280
Newly Diagnosed
none
67
Female
White
15.3
ETV6, BCORL, KRAS
200009820
Newly Diagnosed
none
31
Male
White
85.7
KRAS
200009056
Newly Diagnosed
none
21
Female
White
94.8
Adverse
DNMT3A, BCORL1, TP53
97
AML from bone marrow or PBMC have elevated cell surface TIM-4-L
CER-1236 T cells were also
observed to generate potent anti-cancer responses against myeloid malignancies. AML is a heterogenous, and aggressive hematopoietic malignancy
characterized by the rapid buildup of immature myeloid cells in the bone marrow and blood. We used AML cell lines depicted in the graph
below, Kasumi-1 and MV4-11, to demonstrate cytotoxic anti-AML responses in co-culture studies with CER-1236. Similar to in vitro cytotoxicity
results observed with B cell malignancy and NSCLC cell lines, we show the addition of CER-1236 alone to AML cell lines demonstrates potent
cell killing activity. Kasumi-1 harbors a p53 mutation, marking a subset of unfavorable disease risk AML patients, while MV4-11 cells
carry a FLT-3 mutation, a proliferative AML leukemia subset. Both cell lines co-cultured with untransduced T cells displayed minimal changes
in cell number as compared to cells incubated in the absence of T cells. CER-1236 T cells secreted multiple cytokines in co-cultures with
AML cell lines, including IFNγ, granzyme B and TNFα, all indicative of robust and sustained T cell cytotoxicity.
98
CER-1236 T cells demonstrate robust in vivo elimination of MCL xenografts
The cancer killing capacity
of CER-1236 that was demonstrated in studies involving MCL cell lines was also noted in a mouse xenograft model. Immune deficient NOD
scid gamma ("NSG") mice were xenografted with the human REC-1 cell line at Day -2 and then treated with 8 mg/kg ibrutinib
or vehicle and administered CER-1236 T cells daily from Day -1 to study completion. Administration of 7.5e6 CER-1236 T cells in the presence
of ibrutinib resulted in the elimination of REC-1 tumor burden in all 11 of the mice in this treatment cohort. The administration of CER-1236
T cells in the absence of ibrutinib eliminated the tumors in all nine animals treated with CER-1236 T cells alone. No tumor growth inhibition
was observed in either the vehicle-treated or ibrutinib-treated control groups. Median survival for mice receiving CER-1236 T cells with
or without co-administration of ibrutinib was not reached during the study period. The results of this study are presented in the charts
below.
A single infusion of CER-1236
T cells eliminates tumors and improves survival
The level of CER-1236 T cells
in peripheral blood displayed robust expansion at Day 7, with or without the concomitant administration of ibrutinib. Animals that
received CER-1236 T cells demonstrated an expansion of over 400-fold as compared to Day 2 levels both in the absence and presence of ibrutinib.
High levels of CER-1236 T cells did not persist in the periphery and animals that received CER-1236 T cells showed a greater than 95%
contraction in cell count from peak numbers by Day 14 with subsequent CER-T cell expansion likely prompted by residual tumor cell encounters.
CER-1236 T cells also maintained robust proliferative capacity despite repeated antigen challenges with no evidence of T cell exhaustion
noted. These findings are illustrated in the following charts.
99
A single infusion of CER-1236 T cells generated rapid cell
expansion across repeated challenges
CER-1236 demonstrates in vivo tumor clearance in NSCLC adenocarcinoma
xenograft
We envisioned that the simultaneous
exposure to both osimertinib and CER-1236 would lead to synergistic in vivo anti-tumor responses. HCC827 NSCLC cells were inoculated into
the flanks of NSG mice. Once established, the mice were dosed with a short course of the EGFR inhibitor osimertinib to prime TIM-4-L antigen
on tumors and administered 2.5e6 CER-1236 T cells. Treatment groups that received the EGFR inhibitor alone, after initial tumor regression,
developed progressive disease, as evidenced in the below left graph. In contrast, animals infused with CER-1236 T cells demonstrated potent
anti-tumor responses in the presence of osimertinib. CER-1236 T cells expanded rapidly in the blood, with the highest expansion observed
in the osimertinib-treated cohorts, as observed in the below right graph. Importantly, no evidence of organ toxicity or weight loss was
observed with increases in body weight recorded in all groups over the course of the study. Analysis of the tumors post-infusion indicated
extensive infiltration of T cells compared to untransduced controls.
CER-1236 T cells infused to Osimertinib dosed animals showed tumor
elimination and higher levels of T cell expansion
We believe that the preclinical
models of AML, MCL, ovarian cancer and EGFR-mutation positive NSCLC demonstrate the ability of CER-1236 T cells to induce collaborative
innate-adaptive anti-tumor immune responses in both in vitro and in vivo studies. Moreover, concurrent treatment with standard-of-care
therapeutics for each of these indications increases target ligand, conditionally bolstering CER-1236 T cell function to augment anti-tumor
activity. Additionally, in antigen presentation assays, activated CER-1236 T cells exhibited superior cross-presentation ability relative
to conventional T cells, triggering specific TCR-T cell responses in an MHC class I and TLR-2 dependent manner, overcoming the limited
antigen presentation capabilities of conventional T cells. These results indicate that CER-1236 T cells have the potential to achieve
optimal tumor control by eliciting both cytotoxic effects and cross-priming.
100
CER-1236 T cells did not elicit safety signals in preclinical safety/toxicology
studies
Importantly, no evidence
of toxicity was observed during a safety/toxicology study conducted in mice, a clinically relevant model that has an identical structure
of TIM-4-L as humans. The effects of CER-1236 administration were evaluated at 2 doses at 3 and 28 day timepoints. No incidence of anemia,
thrombocytopenia, neutropenia or coagulation abnormalities were recorded in any condition. Hematologic indices, including hemoglobin/hematocrit,
platelets and neutrophils remained stable throughout the study. No perturbation of clinical chemistries was noted. None of the animals
experienced weight loss, morbidity or unexpected mortality. No clinically relevant tissue abnormalities were noted at either timepoint
at the high dose in any organ evaluated. Overall, these data demonstrate a lack of on-target off-tumor responses and support the safety
profile of CER-1236.
The potential for off-target
toxicity by CER-1236 was also tested against primary human cells or iPSC-derived human cells representing vital organs, including the
CNS, heart, lungs, liver, spleen, kidneys, GI tract, and gonads. CER-1236 was co-cultured with these cells and activation was monitored
by IFNγ secretion or cytotoxic effect. Over the time points tested, CER-1236 showed potent activation and cytotoxicity against AML
cells (Below, top and bottom graphs), but limited activation (Below, top graph) and no cytotoxicity (Below, bottom graph) against any
of the human cell types tested. These experiments support the lack of off-target responses by CER-1236 T cells.
101
CER-1236 Clinical Development Strategy
Based on the extensive preclinical
data that we have assembled regarding the use of CER-1236 T cells to combat cancer, we intend to commence clinical trials with our initial
treatment target being patients suffering from relapsed, or refractory AML as well as those subsets who are positive for Minimal Residual
Disease and the TP53 mutation. We subsequently intend to expand the clinical development of CER-1236 to include solid tumors such as NSCLC
and ovarian cancer. We expect these clinical trials to evaluate the safety, the potential therapeutic utility and applicable dose of CER-1236.
In addition, we anticipate that these clinical trials may provide insight into the possible use of CER-1236 to treat an array of hematologic
and solid tumors.
We believe this drug candidate
has the potential to be a therapy for the unmet needs of targeted indications, if approved, and by leveraging the innate immune system's
phagocytic capabilities, could be differentiated by its safety, tolerability, efficacy and clinical benefit over current therapeutic approaches,
which have been observed in preclinical studies. None of the abovementioned statements regarding any of our products in development are
intended to be a prediction or conclusion of efficacy. No clinical trials on our product candidates have commenced so no conclusions relating
to such attributes can be made.
Disease backgrounds
Acute Myeloid Leukemia
Acute Myeloid Leukemia (AML) is a cancer of the
blood and bone marrow that affects myeloid cells, cells which normally develop into the various types of mature blood cells. It is a fast-progressing
and aggressive form of blood cancer, with a median time from diagnosis to death of just 5.5 months. Despite over 20 FDA approvals for
AML, the death rate in AML patients has only moderately diminished since the 1990s, with the disease hovering around a 32% 5-year overall
survival rate according to the National Cancer Institute. AML was diagnosed in 21,000 Americans in 2019, and there were 11,000 AML-related
deaths in the same year, according to the Leukemia and Lymphoma Society. Like most cancers, it is a terrifying diagnosis for patients
which often leads to many rounds of treatment and a complete disruption of their lives.
102
Figure 1: Rate of new cases of AML and associated
mortality in the United States 1992-2020
Source: NIH, National Cancer Institute
According to Alliance Global Partners, the total
AML therapeutic market is estimated to be approximately USD $1B-$1.5B as of 2023 and projected to grow at a compound annual growth rate
(CAGR) of ~9% based on the historical growth rate, the anticipated approval of new therapeutics, and an increase in the number of total
patients to be diagnosed in the coming years. According to estimates, by 2028, the AML therapeutic market will likely grow to over $2B+,
highlighting the significant economic upside associated with any improvements to the standard of care from the current pipeline therapeutics.
Current therapies and their limitations
Currently, there are over
20 FDA approved therapeutics in the AML space, with eight approvals having come in just two years from 2017-2019. Before then, AML was
treated with decades-old combination chemotherapy regimens, including cytarabine and anthracycline. This regimen has about a 70-80%
complete response ("CR") rates of adults younger than 60 years and 40-60% of fit adults older than 60 years
old. For those eligible for the chemotherapy regimen and experiencing a CR, many patients with adverse features (70%) undergo allogeneic
HSCT which, in some patients are "curative." Unfortunately, a significant proportion (up to 50%) of AML patients are over
the age of 65 and are "unfit" for intensive chemotherapy, requiring different treatment approaches for medically unfit patients.
The treatment landscape for older unfit adults with AML fundamentally changed with the recent availability of new drugs, in particular
the oral B-cell lymphoma 2 inhibitor venetoclax. Venetoclax is used in conjunction with azacytidine to treat these patients, with a complete
response rate ~65%. However the majority of adult patients with AML experience relapse despite initially attaining CR; a venetoclax-based
doublet therapy for medically less-fit adults carries a median survival of ~14.7 months and 4-year survival of less than 20%. The
prognosis for patients who are refractory to or relapse after frontline azacitidine venetoclax is dismal with median overall survival
of 2.4 months, making this an area of high unmet need. Such patients who do not respond to frontline therapy with azacitidine or
venetoclax, and the subset who do not respond to targeted therapies, e.g., IDH1/2 inhibitors, are candidates for investigational trials.
To date, there are no approved cell therapeutic approaches to treat AML.
Ovarian Cancer
The American Cancer Society estimates for ovarian
cancer in the United States for 2024 are:
●
About
19,680 women will receive a new diagnosis of ovarian cancer.
●
About
12,740 women will die from ovarian cancer.
Ovarian cancer is one of the leading causes of
cancer deaths among women. A woman's risk of getting ovarian cancer during her lifetime is about 1 in 87. Her lifetime chance of
dying from ovarian cancer is about 1 in 130. (These statistics don't count low malignant potential ovarian tumors.) This cancer
mainly develops in older women. About half of the women who are diagnosed with ovarian cancer are 63 years or older. It is more common
in White women than Black women.
103
Non-Small Cell Lung Cancer
Most lung cancer statistics include both small
cell lung cancer (SCLC) and non-small cell lung cancer (NSCLC). In general, about 10% to 15% of all lung cancers are SCLC, and about 80%
to 85% are NSCLC. Lung cancer (both small cell and non-small cell) is the second most common cancer in both men and women in the United
States (not counting skin cancer).
The American Cancer Society's estimates
for lung cancer in the US for 2024 are:
●
About 234,580 new cases of lung cancer (116,310
in men and 118,270 in women)
●
About 125,070 deaths from lung cancer (65,790
in men and 59,280 in women)
Lung cancer mainly occurs in older people. Most
people diagnosed with lung cancer are 65 or older; a very small number of people diagnosed are younger than 45. The average age of people
when diagnosed is about 70.
Lung cancer is by far the leading cause of cancer
death in the US, accounting for about 1 in 5 of all cancer deaths. Each year, more people die of lung cancer than of colon, breast,
and prostate cancers combined.
Overall, the chance that a man will develop lung
cancer in his lifetime is about 1 in 16; for a woman, the risk is about 1 in 17. These numbers include both people who smoke and those
who don't smoke. For people who smoke, the risk is much higher, while for those who don't, the risk is lower.
●
Black men are about 12% more likely to develop
lung cancer than White men. The rate is about 16% lower in Black women than in White women.
●
Black and White women have lower rates than men,
but the gap is closing. The lung cancer rate has been dropping among men over the past few decades, but only for about the past decade
in women.
●
Despite their overall risk of lung cancer being
higher, Black men are less likely to develop SCLC than White men.
Statistics on survival in people with lung cancer
vary depending on the type of lung cancer, the stage (extent) of the cancer when it is diagnosed, and other factors.
5-year relative survival rates for non-small
cell lung cancer
These numbers are based on people diagnosed
with NSCLC between 2012 and 2018.
SEER stage
5-year relative survival rate
Localized
65%
Regional
37%
Distant
9%
All SEER stages combined
28%
Our therapeutic approach and development program
We anticipate the design
of the clinical development program for CER-1236 to enable our evaluation of its therapeutic utility in treating both hematologic and
solid tumors, as the capacity of a single therapeutic construct to provide clinical benefit across this diversity of tumor types would
represent a significant advance in cancer immunotherapy. Due to the therapy's novel mechanism of action, engaging both the innate
and the adaptive immune response, and the broad expression profile of PS on a variety of hematologic and solid tumors, we intend to employ
an adaptive Phase 1 trial design to evaluate patient response to CER-1236. As such, the dosing protocol will emphasize a gradual
increase in the delivered dose with the objective of achieving a clinical signal, while ensuring patient safety. We also intend our Phase 1
trial design to enable an evaluation of appropriate dosing strategies to optimize CER-T engagement and proliferation.
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We believe, subject to discussions with the FDA
and other regulatory authorities, that there may be a full development path to registration and use in the larger AML patient populations
on achieving positive safety data along with indications of therapeutic benefit in these initial trial cohorts. We believe CER-1236 may
provide significant treatment advantages over currently available therapeutics, including CAR-T therapy as a result of its potential to
enhance objective response rates and the duration of response related to the comprehensive, coordinated engagement of the innate and adaptive
immune systems and a sustained signaling environment. We believe this novel mechanism of action will enable our advance of a single therapeutic
construct to address the substantial unmet need for a safe and effective cell therapy offering an improved therapeutic profile, despite
significant competition. We subsequently anticipate initiating clinical trials for additional indications, including the possible application
of CER-1236 in the treatment of certain solid tumors such as EGFR mutation positive NSCLC and ovarian cancer.
Manufacturing Strategy
The manufacture of product
candidates derived from our autologous CER-1236 T cells involves the same type of equipment, materials and protocols already used in the
manufacture of currently FDA-approved CAR-T cell therapies, which we believe will provide us numerous benefits. We are planning for CER-1236
cell product to be manufactured using an automated closed process, with product manufacture continuous from bulk harvested cells through
to cryopreserved drug product bags. There are multiple factors involved in the manufacturing process needed to ensure proper CER-T cell
cryopreservation both preceding and following freezing, including the thawing process and post-thaw handling prior to patient administration.
These factors are well understood and procedures have been identified to optimize yield, activity, stability and consistency. In addition,
we may be able to take advantage of the increasing regulatory familiarity with these established protocols. Our expected manufacturing
process embraces a fully automated, closed-system design intended to minimize exposure to potential contaminants and ensure consistent
successful manufacture of the product. The product will be manufactured in a contract manufacturing facility which maintains a quality
system compliant with current Good Manufacturing Practice ("cGMP") requirements.
Lentivirus containing CER-1236
will be produced following a cGMP process using cGMP plasmids.
We have entered into a contract
manufacturing agreement related to the production of drug product for our clinical trials, and we anticipate entering into similar arrangements
regarding plasmid, viral vector and final drug product manufacture for drug product to be used in subsequent clinical trial phases in
the future. We intend to advance related process development work both internally and with our contract manufacturing organization ("CMO")
partners. In the event a product candidate receives regulatory approval, we anticipate entering into contract manufacturing agreements
with one or more CMOs to support product launch and commercial manufacture.
Intellectual Property
Intellectual property is
of vital importance in our field and in biotechnology generally. Our commercial success will depend in part on obtaining and maintaining
patent protection for our current and future product candidates. We seek to protect and enhance proprietary technology, inventions, and
improvements that are commercially important to the development of our business by seeking, maintaining, and defending our patent rights.
When available to expand market exclusivity, our strategy is to obtain or license additional intellectual property related to current
or contemplated development platforms, core elements of technology, and/or clinical candidates. We will also seek to rely on regulatory
protection afforded through inclusion in expedited development and review, data exclusivity, market exclusivity, and patent term extensions,
where available. In addition to patent protection, we also may rely on trademark registration, trade secrets, know-how, other proprietary
information, and continuing technological innovation to develop and maintain our competitive position. We seek to protect and maintain
the confidentiality of proprietary information to protect aspects of our business that are not amenable to, or that we do not consider
appropriate for, patent protection.
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The term of individual patents
depends upon the legal term of the patents in the countries in which they are obtained. In most countries in which we file, including
the United States, the patent term is 20 years from the earliest date of filing a non-provisional patent application. In the
United States, a patent's term may be lengthened by patent term adjustment, which compensates a patentee for administrative
delays by the U.S. Patent and Trademark Office ("USPTO") in examining and granting a patent, or may be shortened if a
patent is terminally disclaimed over an earlier filed patent. In the United States, the patent term of a patent that covers an FDA-approved
drug may also be eligible for patent term extension, which permits patent term restoration as compensation for the patent term lost during
the FDA regulatory review process. The Hatch-Waxman Act permits a patent term extension of up to five years beyond the expiration
of the patent. The length of the patent term extension is related to the length of time the drug is under regulatory review. Patent term
extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent
applicable to an approved drug may be extended, and only those claims covering the approved drug, a method for using it, or a method for
manufacturing it may be extended. Similar provisions are available in Europe and other foreign jurisdictions to extend the term of a patent
that covers an approved drug. In the future, if and when our product candidates receive FDA approval, we expect to apply for patent term
extensions on patents covering those product candidates. We plan to seek patent term extensions to any issued patents we may obtain in
any jurisdiction where such patent term extensions are available.
In some instances, we submit
patent applications directly to the USPTO as provisional patent applications. Corresponding non-provisional patent applications must be
filed not later than 12 months after the provisional application filing date. While we intend to timely file non-provisional patent
applications relating to our provisional patent applications, we cannot predict whether any such patent applications will result in the
issuance of patents that provide us with any competitive advantage.
We will file U.S. non-provisional
applications and Patent Cooperation Treaty ("PCT") applications that claim the benefit of the priority date of earlier filed
provisional applications, when applicable. The PCT system allows a single application to be filed within 12 months of the original priority
date of the provisional patent application, and to designate all of the PCT member states in which national phase patent applications
can later be pursued based on the international patent application filed under the PCT. The PCT search authority performs a patentability
search and issues a non-binding patentability opinion which can be used to evaluate the chances of success for the national applications
in foreign countries prior to having to incur the filing fees. Although a PCT application does not issue as a patent, it allows the applicant
to seek protection in any of the member states through national-phase patent applications. At the end of the period of 30 months from
the first priority date of the provisional patent application, separate national phase patent applications can be pursued in any of the
PCT member states either by direct national filing, or in some cases, by filing through a regional patent organization, such as the European
Patent Office. The PCT system delays expenses, allows a limited evaluation of the chances of success for national/regional patent applications,
and enables substantial savings where applications are abandoned within the first thirty months of filing.
For all patent applications,
we determine claiming strategy on a case-by-case basis. Advice of counsel and our business model and needs are always considered. We continuously
reassess the number and type of patent applications, as well as the scope of our patent claims to pursue coverage and value for our processes
and compositions, given existing patent office rules and regulations. Further, claims may be modified during patent prosecution to meet
our intellectual property and business needs.
We have sought patent protection
in the United States and various international jurisdictions related to the CER-1236 T cell technology platform and its constructs, as
well as their use as individual cellular compositions and product candidates targeting specific diseases. We also intend to seek patent
protection related to the processes and materials used in CER-1236 T cell expression as well as its use in combination therapies. As of
December 2, 2024, our patent portfolio comprises nine different patent families filed in various jurisdictions worldwide. These patent
families include two issued patents in the United States, one of which relates to CER-1236; 34 pending U.S. applications; twelve issued
patents in France, Germany, Italy, Spain, United Kingdom, China, Japan, Hong Kong, and Mexico; and 29 pending applications in Canada,
China, Europe, Hong Kong, Japan, and Korea. These patents and applications, if and when issued, are projected to expire from 2037 to 2042,
absent any available patent term adjustments or extensions. We intend to pursue, when possible, further composition, method of use, dosing,
formulation, and other patent protection directed to our current and new product candidates. We may also pursue patent protection with
respect to manufacturing and drug development processes and technology.
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The following issued patents
are directed at a composition of matter and provide coverage for our CER-1236 T cell candidate:
U.S. Patent No. 11,708,423,
having an anticipated expiration date of March 26, 2039, including 186 days of patent term adjustment awarded by the USPTO;
EP Patent No. 3,519,441 (validated
in the United Kingdom, France, Spain, Germany, and Italy), having an anticipated expiration date of September 26, 2037, absent any available
patent term adjustments or extensions;
JP Patent No. 7286658 having
an anticipated expiration date of September 21, 2038, absent any available patent term adjustments or extensions; and
CN Patent No. ZL201880076426.1
having an anticipated expiration date of September 21, 2038, absent any available patent term adjustments or extensions.
Competition
The biotechnology and pharmaceutical
industries have made substantial investments in recent years into the rapid development of novel immunotherapies for the treatment
of a range of pathologies, including cancers, making this a highly competitive market.
We face substantial competition
from multiple sources, including large and specialty pharmaceutical, biopharmaceutical and biotechnology companies, academic research
institutions and governmental agencies, and public and private research institutions. Our competitors compete with us based on the specific
technologies employed, and on the stage of product candidate development. In addition, many small biotechnology companies have formed
collaborations with large, established companies to (i) obtain support for their research, development, and commercialization of
products, or (ii) combine several treatment approaches to develop longer lasting or more efficacious treatments that may potentially
directly compete with our current or future product candidates.
In addition to the current
standard of care treatments for patients with cancer, numerous commercial and academic preclinical studies and clinical trials are being
undertaken by a large number of parties to assess novel technologies and product candidates in the field of immunotherapy. Results from
these studies and trials have fueled increasing levels of interest in the field of immunotherapy. Accordingly, we face competition from
numerous pharmaceutical and biotechnology entities related to the development of cellular-based therapies to treat cancer. We expect to
face competition from other companies developing TCR T therapies, such as Adaptimmune Therapeutics, plc GlaxoSmithKline plc, MediGene
AG, TCR2 Therapeutics Inc., TScan Therapeutics Inc. and Ziopharm Oncology, Inc. We also may compete with other T cell therapy companies
with target discovery platforms, such as Adaptive Therapeutics, Inc., Immatics, N.V., 3T Biosciences, Inc., and Sana Biotechnology, Inc.,
among others. We may also compete against a significant number of companies engaged in the development of autologous and allogeneic CAR-
T, CAR-NK, TIL and T cell engager technologies including larger companies such as Gilead Sciences, Inc., Bristol-Myers Squibb Company
and Amgen, Inc. as well as smaller companies such as Nkarta Inc., Allogene Therapeutics Inc., Century Therapeutics Inc., and Fate Therapeutics
Inc., among others.
Many of our competitors,
either alone or in combination with their respective strategic partners, have significantly greater financial resources and expertise
in R&D, manufacturing, the regulatory approval process, and marketing than we do. Mergers and acquisitions activity in the pharmaceutical,
biopharmaceutical, and biotechnology sector is likely to result in greater resource concentration among a smaller number of our competitors.
Smaller or early-stage companies may also prove to be significant competitors, particularly through sizeable collaborative arrangements
with established companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel,
establishing clinical trial sites and patient registration for clinical trials, and acquiring technologies complementary to, or necessary
for, our programs.
Our commercial opportunity
could be reduced or eliminated if one or more of our competitors develop and commercialize products that are safer, more effective, better
tolerated, or of greater convenience or economic benefit than our proposed product offering. Our competitors also may be in a position
to obtain FDA or other regulatory approval for their products more rapidly, resulting in a stronger or dominant market position before
we are able to enter the market. The key competitive factors affecting the success of all of our programs are likely to be product safety,
efficacy, convenience, and treatment cost.
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In the event we receive regulatory
approval for any of our product candidates, we will likely compete with other cost-effective and reimbursable treatments used to treat
cancer. The most common treatment modalities for patients with cancer are surgery, radiation, and drug therapy, including chemotherapy,
hormone therapy, biologic therapy, such as monoclonal and bispecific antibodies, immunotherapy, and cell-based therapy, used alone or
in combination to enhance efficacy. Our CER-T cell therapy candidates, if any are approved, may not be competitive with them. Some of
these drugs are branded and subject to patent protection, and others are available on a generic basis. Insurers and other third-party
payors may also encourage the use of generic products or specific branded products. As a result, obtaining market acceptance of any of
our CER-T cell therapies that we successfully introduce to the market may pose challenges.
Government Regulation
In the United States,
biological products are licensed by the FDA for marketing under the Public Health Service Act ("PHS Act") and regulated under
the Federal Food, Drug, and Cosmetic Act ("FDCA"). Both the FDCA and the PHS Act and their corresponding regulations govern,
among other things, the testing, manufacturing, safety, purity, potency, efficacy, labeling, packaging, storage, recordkeeping, distribution,
marketing, sales, import, export, reporting, advertising, and other promotional practices involving biological products. FDA clearance
of an IND application must be obtained before commencing clinical testing of biological products. FDA licensure also must be obtained
before marketing of biological products. The process of obtaining regulatory approvals and the subsequent compliance with appropriate
federal, state, local, and foreign statutes and regulations require the expenditure of substantial time and financial resources.
U.S. Development Process
The process required by the FDA before a biological
product may be marketed in the United States generally involves the following:
●
completion
of nonclinical laboratory tests and animal studies according to Good Laboratory Practices ("GLPs") and applicable requirements
for the humane use of laboratory animals or other applicable regulations;
●
preparation
of clinical trial material in accordance with cGMPs;
●
submission
to the FDA of an application for an IND application, which must become effective before human clinical trials may begin;
●
approval
by an institutional review board ("IRB"), reviewing each clinical site before each clinical trial may be initiated;
●
performance
of adequate and well-controlled human clinical trials according to Good Clinical Practice ("GCP") requirements and any additional
requirements for the protection of human research subjects and their health information, to establish the safety, purity, potency, and
efficacy, of the proposed biological product for its intended use;
●
submission to the FDA of a Biologics License Application ("BLA") for marketing approval that includes substantive evidence of safety, purity, potency, and efficacy from results of nonclinical testing and clinical trials;
●
satisfactory
completion of an FDA inspection prior to BLA approval of the manufacturing facility or facilities where the biological product is produced
to assess compliance with cGMPs, to assure that the facilities, methods, and controls are adequate to preserve the biologic's identity,
strength, quality, and purity;
●
potential
FDA audit of the nonclinical and clinical study sites that generated the data in support of the BLA;
●
potential
FDA advisory committee meeting to elicit expert input on critical issues and including a vote by external committee members;
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●
FDA
review and approval, or licensure, of the BLA, and payment of associated user fees, when applicable; and
●
compliance
with any post-approval requirements, including the potential requirement to implement a Risk Evaluation and Mitigation Strategy ("REMS"),
and the potential requirement to conduct post approval studies.
Before testing any biological
product candidate in humans, the product candidate enters the preclinical testing stage. Nonclinical tests include laboratory evaluations
of product chemistry, pharmacology, toxicity, and formulation, as well as animal studies to assess the potential safety and activity of
the product candidate. The conduct of the nonclinical tests must comply with federal regulations and requirements including GLPs.
The clinical study sponsor
must submit the results of the nonclinical tests, together with manufacturing information, analytical data, any available clinical data
or literature, and a proposed clinical protocol, to the FDA as part of the IND. Some nonclinical testing typically continues after
the IND is submitted. An IND is an exemption that allows an unapproved product to be shipped in interstate commerce for use in an investigational
clinical trial and a request for FDA authorization to administer an investigational product to humans. The IND automatically becomes effective
30 days after receipt by the FDA, unless the FDA requests certain changes to a protocol before the trial can begin, or the FDA places
the clinical trial on a clinical hold within that 30-day time period. In such a case, the IND sponsor and the FDA must resolve any outstanding
concerns before the clinical trial can begin. The FDA may also impose clinical holds on a biological product candidate at any time before
or during clinical trials due to safety concerns or non-compliance. If the FDA imposes a clinical hold, trials may not recommence without
FDA authorization and then only under terms authorized by the FDA.
Clinical trials may involve
the administration of the biological product candidate to healthy volunteers or subjects under the supervision of qualified investigators.
Clinical trials involving some products for certain diseases, including some rare diseases may begin with testing in patients with the
disease. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures,
subject selection, and exclusion criteria, and the parameters to be used to monitor subject safety, including stopping rules that assure
a clinical trial will be stopped if certain adverse events should occur. Each protocol and any amendments to the protocol must be submitted
to the FDA as part of the IND. Clinical trials must be conducted and monitored in accordance with the FDA's regulations comprising
the GCP requirements, including the requirement that all research subjects or his or her legal representative provide informed consent.
Further, each clinical trial must be reviewed and approved by an independent IRB, at or servicing each institution at which the clinical
trial will be conducted. An IRB is charged with protecting the welfare and rights of study participants and considers such items as whether
the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The
IRB also approves the form and content of the informed consent that must be signed by each clinical trial subject or his or her legal
representative and must monitor the clinical trial until completed. Additionally, some trials are overseen by an independent group of
qualified experts organized by the trial sponsor, known as a data safety monitoring board or committee.
Human clinical trials are typically conducted
in three sequential phases that may overlap or be combined:
●
Phase
1
. The biological product is initially introduced into healthy human subjects and tested for safety. In the case of some products
for rare diseases, the initial human testing is often conducted in patients.
●
Phase
2
. The biological product is evaluated in a limited patient population to identify possible adverse effects and safety risks,
preliminarily evaluate the efficacy of the product for specific targeted diseases, and determine dosage tolerance, optimal dosage, and
dosing schedule.
●
Phase
3
. Clinical trials are undertaken to further evaluate dosage, clinical efficacy, potency, and safety in an expanded patient population
at geographically dispersed clinical trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the
product and provide an adequate basis for product labeling. In biologics for rare diseases where patient populations are small and there
is an urgent need for treatment, Phase 3 trials might not be required if an adequate risk/benefit can be demonstrated by the Phase 2
trial.
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Post-approval clinical trials,
sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These clinical trials are used
to gain additional experience from the treatment of patients in the intended therapeutic indication, particularly for long-term safety
follow-up.
During all phases of clinical
development, the FDA requires extensive monitoring and auditing of all clinical activities, clinical data, and clinical trial investigators.
Annual progress reports detailing the results of the clinical trials must be submitted to the FDA. Written IND safety reports must
be promptly submitted to the FDA and the investigators for serious and unexpected adverse events, any findings from other studies, tests
in laboratory animals or in vitro testing that suggest a significant risk for human subjects, or any clinically important increase in
the rate of serious suspected adverse reactions over those listed in the protocol or investigator brochure. The sponsor must submit an
IND safety report within 15 calendar days after the sponsor determines that the information qualifies for such reporting. The sponsor
also must notify the FDA of any unexpected fatal or life-threatening suspected adverse reaction within 7 calendar days after the
sponsor's initial receipt of the information. Phase 1, Phase 2, and Phase 3 clinical trials may not be completed
successfully within any specified period, if at all. The FDA or the sponsor or its data safety monitoring board may suspend a clinical
trial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable
health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being
conducted in accordance with the IRB's requirements or if the biologic has been associated with unexpected serious harm to patients.
Concurrent with clinical
trials, companies usually complete additional animal studies and must also develop additional information about the physical characteristics
of the biologic as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements.
To help reduce the risk of the introduction of adventitious agents with use of biologics, the PHS Act emphasizes the importance of manufacturing
control for products whose attributes cannot be precisely defined. The manufacturing process must be capable of consistently producing
quality batches of the product candidate and, among other things, the sponsor must develop methods for testing the identity, strength,
quality, potency, and purity of the final biological product. Additionally, appropriate packaging must be selected and tested and stability
studies must be conducted to demonstrate that the biological product candidate does not undergo unacceptable deterioration over its shelf
life.
There are also various laws
and regulations regarding laboratory practices, the experimental use of animals, and the use and disposal of hazardous or potentially
hazardous substances in connection with the research. In each of these areas, the FDA and other regulatory authorities have broad regulatory
and enforcement powers, including the ability to levy fines and civil penalties, suspend or delay issuance of approvals, seize or recall
products, and withdraw approvals.
Information about certain
clinical trials must be submitted within specific timeframes for public dissemination on the clinicaltrials.gov website. Sponsors or distributors
of investigational products for the diagnosis, monitoring, or treatment of one or more serious diseases or conditions must also have a
publicly available policy on evaluating and responding to requests for expanded access requests.
U.S. Review and Approval Processes
After the completion of clinical
trials of a biological product, FDA approval of a BLA must be obtained before commercial marketing of the product begins. The BLA must
include results of product development, laboratory, and animal studies, human studies, information on the manufacture and composition
of the product, proposed labeling, and other relevant information. The testing and approval processes require substantial time and effort
and there can be no assurance that the FDA will accept the BLA for filing and, even if filed, that any approval will be granted on a timely
basis, if at all.
110
Under the Prescription Drug
User Fee Act, as amended ("PDUFA"), each BLA may be accompanied by a significant user fee. Under federal law, the submission
of most applications is subject to an application user fee. The sponsor of an approved application is also subject to an annual program
fee. Fee waivers or reductions are available in certain circumstances, including a waiver of the application fee for the first application
filed by a small business. Additionally, no user fees are assessed on BLAs for product candidates designated as orphan drugs, unless the
product candidate also includes a non-orphan indication.
Within 60 days following
submission of the application, the FDA reviews a BLA submitted to determine if it is substantially complete before the agency accepts
it for filing. The FDA may refuse to file any BLA that it deems incomplete or not properly reviewable at the time of submission and may
request additional information. In this event, the BLA must be resubmitted with the additional information. The resubmitted application
is also subject to review before the FDA accepts it for filing. The application also needs to be published and submitted in an electronic
format that can be processed through the FDA's electronic systems. If the electronic submission is not compatible with the FDA's
systems, the BLA can be refused for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review
of the BLA. The FDA reviews the BLA to determine, among other things, whether the proposed product is safe, potent, and effective,
for its intended use, and has an acceptable purity profile, and whether the product is being manufactured in accordance with cGMPs to
assure and preserve the product's identity, safety, strength, quality, potency and purity. The FDA may refer applications for novel
products or products that present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes
clinicians and other experts, for review, evaluation, and a recommendation as to whether the application should be approved and under
what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully
when making decisions. During the biological product approval process, the FDA also will determine whether a REMS is necessary to assure
the safe use of the biological product. If the FDA concludes a REMS is needed, the sponsor of the BLA must submit a proposed REMS; the
FDA will not approve the BLA without a REMS, if required.
Before approving a BLA, the
FDA may inspect the facilities at which the product is manufactured. The FDA will not approve the product unless it determines that the
manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product
within required specifications. Additionally, before approving a BLA, the FDA will typically inspect one or more clinical trial sites
to assure that the clinical trials were conducted in compliance with IND study requirements and GCP requirements. To assure cGMP and GCP
compliance, an applicant must incur significant expenditure of time, money, and effort in the areas of training, record keeping, production
and quality control.
Notwithstanding the submission
of relevant data and information, the FDA may ultimately decide that the BLA does not satisfy its regulatory criteria for approval and
deny approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than the sponsor
interprets the same data. If the agency decides not to approve the BLA in its present form, the FDA will issue a complete response letter
that describes all of the specific deficiencies in the BLA identified by the FDA. The deficiencies identified may be minor, such
as requiring labeling changes, or major, such as requiring additional clinical trials. Additionally, the complete response letter may
include recommended actions that the applicant might take to place the application in a condition for approval. If a complete response
letter is issued, the applicant may either resubmit the BLA, addressing all of the deficiencies identified in the letter, or withdraw
the application.
If a product receives regulatory
approval, the approval may be significantly limited to specific diseases and dosages or the indications for use may otherwise be limited,
which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings, or precautions
be included in the product labeling. The FDA may impose restrictions and conditions on product distribution, prescribing, or dispensing
in the form of a risk management plan, or otherwise limit the scope of any approval. In addition, the FDA may require post-marketing clinical
trials, sometimes referred to as Phase 4 clinical trials, designed to further assess a biological product's safety and effectiveness,
and testing and surveillance programs to monitor the safety of approved products that have been commercialized. As a condition for approval,
the FDA may also require additional nonclinical testing as a Phase 4 commitment.
One of the performance goals
agreed to by the FDA under the PDUFA is to review standard BLAs in ten months from filing and priority BLAs in six months from
filing, whereupon a review decision is to be made. The FDA does not always meet its PDUFA goal dates for standard and priority BLAs and
its review goals are subject to change from time to time. The review process and the PDUFA goal date may be extended by three months
if the FDA requests or the BLA sponsor otherwise provides additional information or clarification regarding information already provided
in the submission within the last three months before the PDUFA goal date.
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Post-Approval Requirements
Maintaining substantial compliance
with applicable federal, state, and local statutes and regulations requires the expenditure of substantial time and financial resources.
Rigorous and extensive FDA regulation of biological products continues after approval, particularly with respect to cGMP. We will
rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantities of any products that we
may commercialize. Manufacturers of our products are required to comply with applicable requirements in the cGMP regulations, including
quality control and quality assurance and maintenance of records and documentation.
Following approval,
the manufacturing facilities are subject to inspections by the FDA, and such inspections may result in an issuance of FDA Form 483
deficiency observations, untitled letter, or a warning letter, which can lead to plant shutdown and other more serious penalties and fines.
Prior to the institution of any manufacturing changes, a determination needs to be made regarding whether FDA approval is required in
advance. If not done in accordance with FDA expectations, the FDA may restrict supply and may take further action. Product reports are
required to be submitted annually. Other post-approval requirements applicable to biological products include reporting of cGMP deviations
that may affect the identity, potency, purity, and overall safety of a distributed product, recordkeeping requirements, reporting of adverse
events, reporting updated safety and efficacy information, and complying with electronic record and signature requirements.
After a BLA is approved,
the product also may be subject to official lot release. As part of the manufacturing process, the manufacturer is required to perform
certain tests on each lot of the product before it is released for distribution. If the product is subject to official release by the
FDA, the manufacturer submits samples of each lot of product to the FDA together with a release protocol showing a summary of the history
of manufacture of the lot and the results of all of the manufacturer's tests performed on the lot. The FDA also may perform certain
confirmatory tests on lots of some products, such as viral vaccines, before releasing the lots for distribution by the manufacturer. In
addition, the FDA may conduct laboratory research related to the regulatory standards on the safety, purity, potency, and effectiveness
of biological products. Systems need to be put in place to record and evaluate adverse events reported by health care providers and patients
and to assess product complaints. An increase in severity or new adverse events can result in labeling changes or product recall. Defects
in manufacturing of commercial products can result in product recalls.
We also must comply with
the FDA's advertising and promotion requirements, such as those related to direct-to-consumer advertising, the prohibition on promoting
products for uses or inpatient populations that are not described in the product's approved labeling (known as "off-label
use"), industry-sponsored scientific and educational activities, and promotional activities involving the internet. Discovery of
previously unknown problems or the failure to comply with the applicable regulatory requirements may result in restrictions on the marketing
of a product or withdrawal of the product from the market as well as possible civil or criminal sanctions. Failure to comply with the
applicable U.S. requirements at any time during the product development process, approval process, or after approval may subject
an applicant or manufacturer to administrative or judicial civil or criminal sanctions and adverse publicity. FDA sanctions could include
refusal to approve pending applications, withdrawal of an approval or license revocation, clinical hold, warning or untitled letters,
product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government
contracts, mandated corrective advertising or communications with doctors, debarment, restitution, disgorgement of profits, or civil or
criminal penalties. Any agency or judicial enforcement action could have a material adverse effect.
Biological product manufacturers
and other entities involved in the manufacture and distribution of approved biological products are required to register their establishments
with the FDA and certain state agencies, and they are subject to periodic unannounced inspections by the FDA and certain state agencies
for compliance with cGMPs and other laws. Accordingly, manufacturers must continue to expend time, money, and effort in the areas of production
and quality control to maintain cGMP compliance. Manufacturers and other parties involved in the drug supply chain for prescription drug
products must also comply with product tracking and tracing requirements and for notifying the FDA of counterfeit, diverted, stolen and
intentionally adulterated products or products that are otherwise unfit for distribution in the United States. Discovery of problems
with a product after approval may result in restrictions on a product, manufacturer, or holder of an approved BLA, including withdrawal
of the product from the market. In addition, changes to the manufacturing process or facility generally require prior FDA approval before
being implemented, and other types of changes to the approved product, such as adding new indications and additional labeling claims,
are also subject to further FDA review and approval.
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Orphan Drug Designation
Under the Orphan Drug Act,
the FDA may grant orphan drug designation ("ODD"), to a biological product intended to treat a rare disease or condition,
which is generally a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000
individuals in the United States and for which there is no reasonable expectation that the cost of developing and making a biological
product available in the United States for this type of disease or condition will be recovered from sales of the product. ODD must
be requested before submitting a BLA. After the FDA grants ODD, the identity of the therapeutic agent and its potential orphan use
are disclosed publicly by the FDA. ODD does not convey any advantage in or shorten the duration of the regulatory review and approval
process.
If a product that has ODD
receives the first FDA approval for the disease or condition for which it has such designation, the product is entitled to orphan product
exclusivity, which means that the FDA may not approve any other applications to market the same biological product for the same indication
for seven years, except in limited circumstances, such as not being able to supply the product for patients or showing clinical superiority
to the product with orphan exclusivity.
Competitors, however, may
receive approval of different products for the indication for which the orphan product has exclusivity or obtain approval for the same
product but for a different indication for which the orphan product has exclusivity. Orphan product exclusivity also could block the approval
of one of our products for seven years if a competitor obtains approval of the same biological product as defined by the FDA or if
our product candidate is determined to be contained within the competitor's product for the same indication or disease. If a biological
product designated as an orphan product receives marketing approval for an indication broader than what is designated, it may not be entitled
to orphan product exclusivity.
Expedited Review and Approval Programs
The FDA has various programs,
including fast track designation, priority review, accelerated approval, and breakthrough therapy designation, that are intended to expedite
or simplify the process for the development and FDA review of biological products that are intended for the treatment of serious or life-threatening
diseases or conditions and demonstrate the potential to address unmet medical needs. The purpose of these programs is to provide important
new biological products to patients earlier than under standard FDA review procedures. To be eligible for a fast track designation, the
FDA must determine, based on the request of a sponsor, that a biological product is intended to treat a serious or life-threatening disease
or condition and demonstrates the potential to address an unmet medical need. The FDA will determine that a product will fill an unmet
medical need if it will provide a therapy where none exists or provide a therapy that may be potentially superior to existing therapy
based on efficacy or safety factors. In addition to other benefits, such as the ability to have greater interactions with the FDA, the
FDA may initiate review of sections of a fast track BLA before the application is complete, a process known as rolling review.
The FDA may give a priority
review designation, such as a rare pediatric disease designation, to biological products that treat a serious condition and, if approved,
would provide a significant improvement in safety or effectiveness. A priority review means that the goal for the FDA to review an application
is six months, rather than the standard review of ten months under current PDUFA guidelines. Most products that are eligible
for fast track designation may also be considered appropriate to receive a priority review. In addition, biological products studied for
their safety and effectiveness in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over
existing treatments may receive accelerated approval and may be approved on the basis of adequate and well-controlled clinical trials
establishing that the biological product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit,
or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict
an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of
the condition and the availability or lack of alternative treatments. As a condition of approval, the FDA may require a sponsor of a biological
product receiving accelerated approval to perform adequate and well-controlled post-marketing studies to verify and describe the predicted
effect on irreversible morbidity or mortality or other clinical endpoint. Under the Food and Drug Omnibus Reform Act of 2022 ("FDORA"),
the FDA may require, as appropriate, that such trials be underway prior to approval or within a specific time period after the date of
approval for a product granted accelerated approval.
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Under FDORA, the FDA has
increased authority for expedited procedures to withdraw approval of a drug or indication approved under accelerated approval if, for
example, the confirmatory trial fails to verify the predicted clinical benefit of the product. In addition, for products being considered
for accelerated approval, the FDA generally requires, unless otherwise informed by the agency, that all advertising and promotional materials
intended for dissemination or publication within 120 days of marketing approval be submitted to the agency for review during the
pre-approval review period.
Moreover, a sponsor can request
designation of a product candidate as a "breakthrough therapy." A breakthrough therapy is defined as a drug or biological
product that is intended, alone or in combination with one or more other drugs or biologics, to treat a serious or life-threatening disease
or condition, and preliminary clinical evidence indicates that the drug or biological product may demonstrate substantial improvement
over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical
development. Drug and biological products designated as breakthrough therapies are also eligible for accelerated approval. The FDA must
take certain actions, such as holding timely meetings and providing advice, intended to expedite the development and review of an application
for approval of a breakthrough therapy.
Even if a product qualifies
for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification or decides
that the time period for FDA review or approval will not be shortened. Furthermore, fast-track designation, priority review, accelerated
approval, and breakthrough therapy designation do not change the standards for approval and may not ultimately expedite the development
or approval process.
Biologics Price Competition and Innovation
Act
The Biologics Price Competition
and Innovation Act of 2009 ("BPCIA"), which was enacted as part of the Patient Protection and Affordable Care Act, as amended
by the Health Care and Education Reconciliation Act of 2010 (collectively, the "Affordable Care Act"), created an
abbreviated approval pathway for biological products that are demonstrated to be "biosimilar" or "interchangeable"
with an FDA-licensed reference biological product via an approved BLA. Biosimilarity to an approved reference product requires that
there be no differences in conditions of use, route of administration, dosage form, and strength, and no clinically meaningful differences
between the biological product and the reference product in terms of safety, purity, and potency. Biosimilarity is demonstrated in steps
beginning with rigorous analytical studies or "fingerprinting", in vitro studies, in vivo animal studies, and generally at
least one clinical study. If at any point in the stepwise biosimilarity process a significant difference is observed, then the products
are not biosimilar, and the development of a standalone BLA is necessary. In order to meet the higher hurdle of interchangeability, a
sponsor must demonstrate that the biosimilar product can be expected to produce the same clinical result as the reference product, and
for a product that is administered more than once, that the risk of switching between the reference product and biosimilar product is
not greater than the risk of maintaining the patient on the reference product. Complexities associated with the larger, and often more
complex, structures of biological products, as well as the process by which such products are manufactured, pose significant hurdles to
implementation that are still being evaluated by the FDA. Under the BPCIA, a reference biologic is granted 12 years of exclusivity
from the time of first licensure of the reference product.
Regulation Outside of the United States
In addition to regulations
in the United States, we are subject to a variety of regulations in other jurisdictions governing clinical studies, commercial sales,
and distribution of our products. Most countries outside of the United States require that clinical trial applications be submitted
to and approved by the local regulatory authority for each clinical study. In the European Union (the "European Union"), for
example, an application must be submitted to the national competent authority and an independent ethics committee in each country in which
we intend to conduct clinical trials, much like the FDA and IRB, respectively. Under the Clinical Trials Regulation (EU) No 536/2014,
which replaced the Clinical Trials Directive 2001/20/EC on January 31, 2022, a single application is now made through the Clinical
Trials Information System for clinical trial authorization in up to 30 EU/EEA countries at the same time and with a single set of documentation.
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The assessment of applications
for clinical trials is divided into two parts (Part I contains scientific and medicinal product documentation and Part II contains
the national and patient-level documentation). Part I is assessed by a coordinated review by the competent authorities of all European
Union member states (the "Member States") in which an application for authorization of a clinical trial has been submitted
(Member States concerned) of a draft report prepared by a reference Member State. Part II is assessed separately by each Member State
concerned. The role of the relevant ethics committees in the assessment procedure continues to be governed by the national law of the
Member State concerned, however overall related timelines are defined by the Clinical Trials Regulation. The Clinical Trials Regulation
also provides for simplified reporting procedures for clinical trial sponsors.
In addition, whether or not
we obtain FDA approval for a product, we must obtain approval of a product by the comparable regulatory authorities of countries outside
the United States before we can commence marketing of the product in those countries. The approval process and requirements vary
from country to country, so the number and type of nonclinical, clinical, and manufacturing studies needed may differ, and the time may
be longer or shorter than that required for FDA approval.
To obtain regulatory approval
of our medicinal products under the European Union regulatory system, we are required to submit a marketing authorization application
("MAA"), to be assessed in the centralized procedure. The centralized procedure allows applicants to obtain a marketing authorization
("MA") that is valid throughout the European Union, and the additional Member States of the European Economic Area (Iceland,
Liechtenstein and Norway) ("EEA"). It is compulsory for medicinal products manufactured using biotechnological processes,
orphan medicinal products, advanced therapy medicinal products (gene-therapy, somatic cell-therapy or tissue-engineered medicines) and
medicinal products containing a new active substance which is not authorized in the European Union and which is intended for the treatment
of HIV, AIDS, cancer, neurodegenerative disorders, auto-immune and other immune dysfunctions, viral diseases or diabetes. The centralized
procedure is optional for any other products containing new active substances not authorized in the European Union or for products which
constitute a significant therapeutic, scientific, or technical innovation or for which a centralized authorization is in the interests
of patients at European Union level. When a company wishes to place on the market a medicinal product that is eligible for the centralized
procedure, it sends an application directly to the EMA, to be assessed by the Committee for Medicinal Products for Human Use ("CHMP").
The CHMP is responsible for conducting the assessment of whether a medicine meets the required quality, safety, and efficacy requirements,
and whether the product has a positive risk/benefit profile. The procedure results in a European Commission decision, which is valid in
all European Union Member States. The centralized procedure is as follows: full copies of the MAA are sent to a rapporteur and a co-rapporteur
designated by the competent European Medicines Agency ("EMA") scientific committee. They coordinate the EMA's scientific
assessment of the medicinal product and prepare draft reports. Once the draft reports are prepared (other experts might be called upon
for this purpose), they are sent to the CHMP, whose comments or objections are communicated to the applicant. The rapporteur is therefore
the privileged interlocutor of the applicant and continues to play this role, even after the MA has been granted.
The rapporteur and co-rapporteur
then assess the applicant's replies, submit them for discussion to the CHMP, and taking into account the conclusions of this debate,
prepare a final assessment report. Once the evaluation is completed, the CHMP gives a favorable or unfavorable opinion as to whether to
grant the authorization. When the opinion is favorable, it shall include the draft summary of product characteristics ("SmPC"),
the package leaflet, and the texts proposed for the various packaging materials. The time limit for the evaluation procedure is 210 days
(excluding clock stops, when additional written or oral information is to be provided by the applicant in response to questions asked
by the CHMP). The EMA then has fifteen days to forward its opinion to the European Commission, which will make a binding decision
on the grant of an MA within 67 days of the receipt of the CHMP opinion.
National marketing authorizations,
which are issued by the competent authorities of the Member States of the European Union and only cover their respective territory, are
available for products not falling within the mandatory scope of the centralized procedure. Where a product has already been authorized
for marketing in a Member State of the European Union, this national authorization can be recognized in other Member States through the
mutual recognition procedure. If the product has not received a national authorization in any Member State at the time of application,
it can be approved simultaneously in various Member States through the decentralized procedure.
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In the European Union, new
chemical entities (including both small molecules and biological medicinal products) approved on the basis of a complete and independent
data package qualify for eight years of data exclusivity upon marketing authorization and an additional two years of market exclusivity.
Data exclusivity, if granted, prevents generic or biosimilar applicants from referencing the innovator's pre-clinical and clinical
trial data contained in the dossier of the reference product when applying for a generic or biosimilar MA, for a period of eight years
from the date on which the reference product was first authorized in the European Union. During the additional two-year period of market
exclusivity, a generic or biosimilar MAA can be submitted, and the innovator's data may be referenced, but no medicinal product
can be marketed until the expiration of the market exclusivity. The overall ten-year period will be extended to a maximum of eleven years
if, during the first eight years of those ten years, the MA holder obtains an authorization for one or more new therapeutic indications
which, during the scientific evaluation prior to authorization, is held to bring a significant clinical benefit in comparison with currently
approved therapies. There is no guarantee that a product will be considered by the EMA to be a new chemical entity, and products may not
qualify for data exclusivity. Even if a product is considered to be a new chemical entity so that the innovator gains the prescribed period
of data exclusivity, another company could nevertheless also market another version of the product if such company obtained an MA based
on an MAA with a complete and independent data package of pharmaceutical tests, preclinical tests and clinical trials.
The criteria for designating
an "orphan medicinal product" in the European Union are similar in principle to those in the United States. Under Article 3
of Regulation (EC) 141/2000, a medicinal product may be designated as an orphan medicinal product if it is intended for the diagnosis,
prevention, or treatment of a life-threatening or chronically debilitating condition that affects no more than five in 10,000 persons
in the European Union when the application is made. In addition, orphan designation can be granted if the product is intended for a life
threatening, seriously debilitating, or serious and chronic condition in the European Union and, without incentives, it is unlikely that
sales of the product in the European Union would be sufficient to justify the necessary investment in its development. Orphan designation
is only available if there is no other satisfactory method approved in the European Union of diagnosing, preventing, or treating the applicable
orphan condition, or if such a method exists, the proposed orphan medicinal product will be of significant benefit to patients affected
by such condition, as defined in Regulation (EC) 847/2000.
Orphan designation provides
opportunities for fee reductions, protocol assistance, and access to the centralized procedure. Fee reductions are limited to the first
year after an MA, except for small and medium enterprises. In addition, if a product which has an orphan designation subsequently receives
a centralized MA for the indication for which it has such designation, the product is entitled to orphan market exclusivity, which means
the EMA may not approve any other application to market a similar medicinal product for the same indication for a period of ten years.
A "similar medicinal product" is defined as a medicinal product containing a similar active substance or substances as contained
in an authorized orphan medicinal product, and which is intended for the same therapeutic indication. The exclusivity period may be reduced
to six years if, at the end of the fifth year, it is shown that the designation criteria are no longer met, including where it is
shown that the product is sufficiently profitable not to justify maintenance of market exclusivity. Additionally, an MA may be granted
to a similar medicinal product for the same indication as an authorized orphan product at any time if:
●
the second applicant can establish that its product, although similar to the authorized product, is safer, more effective or otherwise clinically superior;
●
the MA holder of the authorized product consents to a second orphan medicinal product application; or
●
the MA holder of the authorized product cannot supply enough orphan medicinal product.
A pediatric investigation
plan ("PIP") in the European Union is aimed at ensuring that the necessary data are obtained to support the authorization
of a medicine for children, through studies in children. All applications for MAs for new medicines have to include the results of studies
as described in an agreed PIP, unless the medicine is exempt because of a deferral or waiver. This requirement also applies when an MA
holder wants to add a new indication, pharmaceutical form, or route of administration for a medicine that is already authorized and covered
by intellectual property rights. Several rewards and incentives for the development of pediatric medicines for children are available
in the European Union. Medicines authorized across the European Union with the results of studies from a PIP included in the product information
are eligible for an extension of their supplementary protection certificate ("SPC") by six months (provided an application
for such extension is made at the same time as filing the SPC application for the product, or at any point up to two years before
the SPC expires). This is the case even when the studies' results are negative. For orphan medicinal products, the incentive is
an additional two years of market exclusivity. Scientific advice and protocol assistance at the EMA are free of charge for questions
relating to the development of pediatric medicines. Medicines developed specifically for children that are already authorized but are
not protected by a patent or supplementary protection certificate are eligible for a pediatric-use MA ("PUMA"). If a PUMA
is granted, the product will benefit from ten years of market protection as an incentive.
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In March 2016, the EMA
launched an initiative, the PRIority MEdicines ("PRIME") scheme, to facilitate development of product candidates in indications,
often rare, for which few or no therapies currently exist. The PRIME scheme is intended to encourage development of products in areas
of unmet medical need and provides accelerated assessment of products representing substantial innovation reviewed under the centralized
procedure. Products from small- and medium-sized enterprises may qualify for earlier entry into the PRIME scheme than larger companies
on the basis of compelling non-clinical data and tolerability data from initial clinical trials. Many benefits accrue to sponsors of product
candidates with PRIME designation, including but not limited to, early and proactive regulatory dialogue with the EMA, frequent discussions
on clinical trial designs and other development program elements, and potentially accelerated MAA assessment once a dossier has been submitted.
Importantly, once a candidate medicine has been selected for the PRIME scheme, a dedicated contact and rapporteur from the CHMP or from
the Committee for Advanced Therapies ("CAT") are appointed early in the PRIME scheme facilitating increased understanding
of the product at EMA's committee level. An initial meeting with the CHMP/CAT rapporteur initiates these relationships and includes
a team of multidisciplinary experts at the EMA to provide guidance on the overall development and regulatory strategies. PRIME eligibility
does not change the standards for product approval, and there is no assurance that any such designation or eligibility will result in
expedited review or approval.
The aforementioned European
Union rules are generally applicable in the EEA.
The European Commission introduced
legislative proposals in April 2023 that, if implemented, will replace the current regulatory framework in the European Union for all
medicines (including those for rare diseases and for children). The European Commission has provided the legislative proposals to the
European Parliament and the European Council for their review and approval. In October 2023, the European Parliament published draft reports
proposing amendments to the legislative proposals, which will be debated by the European Parliament. Once the European Commission's
legislative proposals are approved (with or without amendment), they will be adopted into European Union law.
The United Kingdom left the
European Union on January 31, 2020, and the United Kingdom and the European Union have concluded a trade and cooperation agreement
("TCA") which was provisionally applicable since January 1, 2021 and has been formally applicable since May 1, 2021.
The TCA includes specific
provisions concerning pharmaceuticals, which include the mutual recognition of GMP, inspections of manufacturing facilities for medicinal
products and GMP documents issued, but does not provide for wholesale mutual recognition of United Kingdom and European Union pharmaceutical
regulations. At present, Great Britain has implemented European Union legislation on the marketing, promotion and sale of medicinal products
through the Human Medicines Regulations 2012 (as amended). Except in respect of the European Union Clinical Trials Regulation, the regulatory
regime in Great Britain therefore largely aligns with current European Union medicines regulations, however it is possible that these
regimes will diverge more significantly in future now that Great Britain's regulatory system is independent from the European Union
and the TCA does not provide for mutual recognition of United Kingdom and European Union pharmaceutical legislation. However, notwithstanding
that there is no wholesale recognition of European Union pharmaceutical legislation under the TCA, under a new framework mentioned below
which was put in place by the Medicines and Healthcare products Regulatory Agency ("MHRA"), the United Kingdom's medicines
regulator, on January 1, 2024, the MHRA may take into account decisions on the approval of MAs from the EMA (and certain other regulators)
when considering an application for a Great Britain MA.
On February 27, 2023,
the United Kingdom government and the European Commission announced a political agreement in principle to replace the Northern Ireland
Protocol (the "Northern Ireland Protocol") with a new set of arrangements, known as the "Windsor Framework". This
new framework fundamentally changes the existing system under the Northern Ireland Protocol, including with respect to the regulation
of medicinal products in the United Kingdom. In particular, the MHRA will be responsible for approving all medicinal products destined
for the United Kingdom market (i.e., Great Britain and Northern Ireland), and the EMA will no longer have any role in approving medicinal
products destined for Northern Ireland. A single United Kingdom-wide MA will be granted by the MHRA for all medicinal products to be sold
in the United Kingdom, enabling products to be sold in a single pack and under a single authorization throughout the United Kingdom. The
Windsor Framework was approved by the European Union-United Kingdom Joint Committee on March 24, 2023, so the United Kingdom government
and the European Union will enact legislative measures to bring it into law. On June 9, 2023, the MHRA announced that the medicines aspects
of the Windsor Framework will apply from January 1, 2025.
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The MHRA has introduced changes
to national licensing procedures, including procedures to prioritize access to new medicines that will benefit patients, an accelerated
assessment procedure and new routes of evaluation for novel products and biotechnological products. On January 1, 2024, the MHRA put in
place a new international recognition framework under which the MHRA may have regard to decisions on the approval of MAs made by the EMA
and certain other regulators when determining an application for a new Great Britain MA.
There is now no pre-MA orphan
designation in Great Britain. Instead, the MHRA reviews applications for orphan designation in parallel to the corresponding MAA. The
criteria are essentially the same, but have been tailored for the Great Britain market, i.e., the prevalence of the condition in Great
Britain (rather than the European Union) must not be more than five in 10,000. Should an orphan designation be granted, the period or
market exclusivity will be set from the date of first approval of the product in Great Britain or the European Union, wherever is earliest.
Healthcare Laws and Regulations
Sales of our product candidate,
if approved, or any other future product candidate, will be subject to healthcare regulation and enforcement by the federal government
and the states and foreign governments in which we might conduct our business. The healthcare laws and regulations that may affect our
ability to operate include the following:
●
The federal Anti-Kickback Statute makes it illegal for any person or entity to knowingly and willfully, directly or indirectly, solicit, receive, offer, or pay any remuneration that is in exchange for or to induce the referral of business, including the purchase, order, lease of any good, facility, item or service for which payment may be made under a federal healthcare program, such as Medicare or Medicaid. The term "remuneration" has been broadly interpreted to include anything of value;
●
Federal false claims, and false statement laws, including the federal civil False Claims Act, and Civil Monetary Penalties Law, prohibits, among other things, any person or entity from knowingly presenting, or causing to be presented, for payment to, or approval by, federal programs, including Medicare and Medicaid, claims for items or services, including drugs and biologics, that are false or fraudulent;
●
Health Insurance Portability and Accountability Act of 1996 ("HIPAA") created additional federal criminal statutes that prohibit among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors or making any false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services;
●
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 and their implementing regulations, imposes obligations on certain covered healthcare providers, health plans, and healthcare clearinghouses and their respective business associates and covered subcontractors types of individuals and entities regarding the electronic exchange of information in common healthcare transactions, as well as standards relating to the privacy and security of individually identifiable health information;
●
The federal Physician Payments Sunshine Act requires certain manufacturers of drugs, devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children's Health Insurance Program, with specific exceptions, to report annually to the Centers for Medicare and Medicaid Services ("CMS"), information related to payments or other transfers of value made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors), physician assistants, nurse practitioners, clinical nurse specialists, anesthesiologist assistants, certified nurse anesthetists and certified nurse-midwives and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members.; and
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●
The Foreign Corrupt Practices Act ("FCPA") prohibits U.S. businesses and their representatives from offering to pay, paying, promising to pay or authorizing the payment of money or anything of value to a foreign official in order to influence any act or decision of the foreign official in his or her official capacity or to secure any other improper advantage in order to obtain or retain business.
Many states have similar
laws and regulations, such as anti-kickback and false claims laws, that may be broader in scope and may apply regardless of payor, in
addition to items and services reimbursed under Medicaid and other state programs. Additionally, we may be subject to state laws that
require pharmaceutical companies to comply with the federal government's and/or pharmaceutical industry's voluntary compliance
guidelines, state laws that require drug and biologics manufacturers to report information related to payments and other transfers of
value to physicians and other healthcare providers or marketing expenditures, as well as state and foreign laws governing the privacy
and security of health information, many of which differ from each other in significant ways and often are not preempted by HIPAA. Additionally,
to the extent that our product is sold in a foreign country, we may be subject to similar foreign laws.
Pharmaceutical Coverage, Pricing and Reimbursement
Significant uncertainty exists
as to the coverage and reimbursement status of any product candidates for which we obtain regulatory approval. In the United States
and markets in other countries, sales of any products for which we receive regulatory approval for commercial sale will depend, in part,
on the extent to which third-party payors provide coverage, and establish adequate reimbursement levels for such drug products. In the
United States, third-party payors include federal and state healthcare programs, government authorities, private managed care providers,
private health insurers and other organizations.
Third-party payors are increasingly
challenging the price, examining the medical necessity and reviewing the cost-effectiveness of medical drug products and medical services,
in addition to questioning their safety and efficacy. Such payors may limit coverage to specific drug products on an approved list, also
known as a formulary, which might not include all of the FDA-approved drugs for a particular indication. We may need to conduct expensive
pharmaco-economic studies in order to demonstrate the medical necessity and cost-effectiveness of our products, in addition to the costs
required to obtain the FDA approvals. Nonetheless, our product candidates may not be considered medically necessary or cost-effective.
Moreover, the process for determining whether a third-party payor will provide coverage for a drug product may be separate from the process
for setting the price of a drug product or for establishing the reimbursement rate that such a payor will pay for the drug product. A
payor's decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved. Further,
one payor's determination to provide coverage for a drug product does not assure that other payors will also provide coverage for
the drug product. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize
an appropriate return on our investment in product development.
The marketability of any
product candidates for which we receive regulatory approval for commercial sale may suffer if the government and third-party payors fail
to provide adequate coverage and reimbursement. In addition, emphasis on managed care in the United States has increased and could
increase the pressure on pharmaceutical pricing. Coverage policies and third-party reimbursement rates may change at any time. Even if
favorable coverage and reimbursement status is attained for one or more products for which we receive regulatory approval, less favorable
coverage policies and reimbursement rates may be implemented in the future.
Healthcare Reform
The United States and
many foreign jurisdictions have enacted or proposed legislative and regulatory changes affecting the healthcare system. The United States
government, state legislatures and foreign governments also have shown significant interest in implementing cost-containment programs
to limit the growth of government-paid healthcare costs, including price controls, restrictions on reimbursement, and requirements for
substitution of generic products for branded prescription drugs and biologics. In recent years, Congress has considered reductions
in Medicare reimbursement levels for drugs and biologics administered by physicians. CMS, the agency that administers the Medicare and
Medicaid programs, also has authority to revise reimbursement rates and to implement coverage restrictions for some drugs and biologics.
Cost reduction initiatives and changes in coverage implemented through legislation or regulation could decrease utilization of and reimbursement
for any approved products. While Medicare regulations apply only to drug benefits for Medicare beneficiaries, private payors often follow
Medicare coverage policy and payment limitations in setting their own reimbursement rates. Therefore, any reduction in reimbursement that
results from federal legislation or regulation may result in a similar reduction in payments from private payors.
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The Affordable Care Act substantially
changed the way healthcare is financed by both governmental and private insurers, and significantly impacts the pharmaceutical industry.
The Affordable Care Act is intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance
remedies against healthcare fraud and abuse, add new transparency requirements for healthcare and health insurance industries, impose
new taxes and fees on pharmaceutical and medical device manufacturers, and impose additional health policy reforms. Among other things,
the Affordable Care Act expanded manufacturers' rebate liability under the Medicaid Drug Rebate Program by increasing the minimum
Medicaid rebate for both branded and generic drugs and biologics, expanded the 340B program, and revised the definition of average manufacturer
price ("AMP"), which could increase the amount of Medicaid drug rebates manufacturers are required to pay to states. The legislation
also extended Medicaid drug rebates, previously due only on fee-for-service Medicaid utilization, to include the utilization of Medicaid
managed care organizations as well and created an alternative rebate formula for certain new formulations of certain existing products
that is intended to increase the amount of rebates due on those drugs.
Other legislative changes
have been proposed and adopted since passage of the Affordable Care Act. The Budget Control Act of 2011, among other things,
included automatic reductions to several government programs, including aggregate reductions to Medicare payments to healthcare providers
of up to 2.0% per fiscal year, which went into effect in April 2013 and will remain in effect through 2031. The American Taxpayer
Relief Act was signed into law, which, among other things, reduced Medicare payments to several types of providers, including hospitals,
imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments
to providers from three to five years.
There have been executive,
judicial and congressional challenges to the Affordable Care Act. We cannot predict what additional challenges to the Affordable Care
Act may arise in the future, the outcome thereof, or the impact any such actions may have on our business. Additionally, the Biden administration
has introduced various measures in recent years, focusing on healthcare and medical-product pricing, in particular. It remains to
be seen how these measures will affect our business and there is uncertainty as to what other healthcare programs and regulations may
be implemented or changed at the federal and/or state level in the U.S., but it is possible that such initiatives could have an adverse
effect on our ability to obtain FDA approval or clearance and/or successfully commercialize products in the U.S. in the future. For
example, any changes that reduce, or impede the ability of healthcare providers to obtain reimbursement for medical procedures in which
the products we currently, or intend to, commercialize are used, or that reduce medical procedure volumes, could adversely affect our
operations and/or future business plans. The financial impact of U.S. healthcare reform legislation over the next few years
will depend on a number of factors, including the policies reflected in implementing regulations and guidance and changes in sales volumes
for medical devices affected by the legislation. From time to time, legislation is drafted, introduced, and passed that could significantly
change the statutory provisions governing coverage, reimbursement, pricing, and marketing of medical device products. In addition, third-party
payor coverage and reimbursement policies are often revised or interpreted in ways that may significantly affect our business and our
products.
Further legislative and regulatory
changes under the Affordable Care Act remain possible, and it is unknown what form any such changes or any law would take, and how or
whether it may affect our business in the future. We expect that changes or additions to the Affordable Care Act, the Medicare and Medicaid
programs, changes allowing the federal government to directly negotiate drug prices, and changes stemming from other healthcare reform
measures, especially with regard to healthcare access, financing or other legislation in individual states, could have a material adverse
effect on the healthcare industry.
The Affordable Care Act requires
pharmaceutical manufacturers of branded prescription drugs and biologics to pay a branded prescription drug fee to the federal government.
Each individual pharmaceutical manufacturer pays a prorated share of the branded prescription drug fee, based on the dollar value of its
branded prescription drug sales to certain federal programs identified in the law. Furthermore, the law requires manufacturers to provide
a 50% discount (increased by subsequent legislation to a 70% discount) off the negotiated price of prescriptions filled by beneficiaries
in the Medicare Part D coverage gap, referred to as the "donut hole." The Inflation Reduction Act of 2022 ("IR
Act") includes several provisions that may impact our business to varying degrees. The IR Act also includes provisions that reduce
the out-of-pocket spending cap for Medicare Part D beneficiaries from $7,050 to $2,000 starting in 2025, thereby effectively eliminating
the donut hole. Pharmaceutical manufacturers will be required to provide a 10% discount of all biosimilar and brand name prescription
drugs covered under the Medicare Part D plan benefit during the initial coverage period before the beneficiary reaches the $2,000
out-of-pocket spending cap. Once the patient reaches the out-of-pocket spending cap, they enter catastrophic coverage and drug manufacture
liability for biosimilar and brand name drugs increases to 20%. Furthermore, the IR Act allows the U.S. government to negotiate Medicare
Part B and Part D price caps for certain high-cost drugs and biologics without generic or biosimilar competition; requires companies
to pay rebates to Medicare for certain drug prices that increase faster than inflation; and delays until January 1, 2032 the implementation
U.S. Department of Health and Human Service ("HHS") rebate rule that would have limited the fees that pharmacy benefit
managers can charge.
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The Affordable Care Act
also expanded the Public Health Service's 340B drug pricing program, which requires participating manufacturers to agree to charge
statutorily defined covered entities no more than the 340B "ceiling price" for the manufacturer's covered outpatient
drugs. The Affordable Care Act expanded the 340B program to include additional types of covered entities: certain freestanding cancer
hospitals, critical access hospitals, rural referral centers, and sole community hospitals, each as defined by the Affordable Care Act.
Because the 340B ceiling price is determined based on AMP and Medicaid drug rebate data, revisions to the Medicaid rebate formula and
AMP definition could cause the required 340B discounts to increase.
The American Rescue Plan
Act of 2021 eliminated the statutory Medicaid drug rebate cap, previously set at 100% of a drug's AMP, for single source
and innovator multiple source drugs, beginning January 1, 2024. Payment methodologies may be subject to changes in healthcare legislation
and regulatory initiatives as well. For example, CMS may develop new payment and delivery models, such as bundled payment models.
Recently, there has been
heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products. Such scrutiny has resulted
in several recent U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things,
bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the cost of
drugs under Medicare, and reform government program reimbursement methodologies for pharmaceutical products.
At the state level, legislatures
have increasingly passed legislation and implemented regulations designed to control pharmaceutical product pricing, including price or
patient reimbursement constraints, discounts, restrictions on certain product access, and marketing cost disclosure and transparency measures,
and in some cases, designed to encourage importation from other countries and bulk purchasing.
We expect that additional
federal, state, and foreign healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal
and state governments will pay for healthcare products and services, which could result in limited coverage and reimbursement and reduced
demand for our products, once approved, or additional pricing pressures.
Employees and Human Capital Resources
As of December 2, 2024, we
had [six] full-time employees, all are conducting Research and Development. Our employees are not represented by labor unions or covered
by collective bargaining agreements and we consider our relationship with our employees to be good.
Compensation and Benefits
Our employee-related objectives
include, as applicable, identifying, recruiting, retaining, and incentivizing our management team and our clinical, scientific and other
employees and consultants. The principal purposes of our equity and cash incentive plans are to attract, retain and motivate personnel
through the granting of stock-based and cash-based compensation awards, in order to align our interests and the interests of our stockholders
with those of our employees and consultants. In addition, all of our employees are eligible for health insurance, paid and unpaid leaves
including paid parental leave, a retirement plan, life and disability/accident coverage, and parking or commuter assistance and an employee
assistance.
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Corporate Information
We were incorporated under
the laws of the state of Delaware on October 2, 2020 under the name Phoenix Biotech Acquisition Corporation. Legacy CERo was incorporated
under the laws of the state of Delaware on September 23, 2016. On February 14, 2024, we consummated a merger with Legacy CERo and subsequently
changed our name to "CERo Therapeutics Holdings, Inc." Our corporate headquarters are currently located at 210 Haskins Way,
Suite 230, South San Francisco, California 94080, and our telephone number is (215) 731-9450. Our website is
www.cero.bio
. The
information on our website is not incorporated by reference in this filing or in any other filings we make with the SEC.
Available Information
Our internet address is
www.cero.bio
.
Our investor relations website is located at
www.cero.bio/investors
. We make available free of charge on our investor relations
website under "SEC Filings" our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K,
our directors' and officers' Section 16 reports and any amendments to those reports as soon as reasonably practicable after
filing or furnishing such materials to the SEC. They are also available for free on the SEC's website at
www.sec.gov
.
We use our investor relations
website as a means of disclosing material non-public information and for complying with our disclosure obligations under Regulation FD.
Investors should monitor such website, in addition to following our press releases, SEC filings and public conference calls and webcasts.
Information relating to our corporate governance is also included on our investor relations website. The information in or accessible
through the SEC and our website are not incorporated into, and are not considered part of, this filing.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF PBAX
The following discussion
and analysis of PBAX's financial condition and results of operations should be read in conjunction with our audited consolidated
financial statements and the notes related thereto appearing at the end of this prospectus. Certain information contained in the discussion
and analysis set forth below includes forward-looking statements. Our actual results may differ materially from those anticipated in these
forward-looking statements as a result of many factors, including those set forth under "Cautionary Note Regarding Forward-Looking
Statements," "Risk Factors" and elsewhere in this prospectus. All references herein to "we," "us,"
or "our" in this section refer to Phoenix Biotech Acquisition Corp. prior to consummation of the Business Combination and
to CERo Therapeutics Holdings, Inc. and its consolidated subsidiaries following the consummation of the Business Combination.
Overview
We are a blank check company
incorporated in Delaware on June 8, 2021. We were formed for the purpose of effecting a merger, capital stock exchange, asset acquisition,
stock purchase, reorganization or similar business combination with one or more target businesses, using cash from the proceeds of our
Initial Public Offering and the sale of the Private Placement Units (as defined below) that occurred simultaneously with the completion
of our Initial Public Offering, our capital stock, debt or a combination of cash, stock and debt.
We incurred significant costs
in the pursuit of a business combination. As described below, the Business Combination was consummated on February 14, 2024, after the
date of the audited consolidated financial statements included elsewhere in this prospectus.
Recent Developments
On January 3, 2024, we held
a special meeting of stockholders (the "Third Special Meeting"). At the Third Special Meeting, our stockholders approved a
proposal to amend the Investment Management Trust Agreement (the "IMTA"), dated as of October 5, 2021, as amended by the Amendment
No. 1 dated December 20, 2022 and Amendment No. 2 dated July 7, 2023, by and between us and Continental Stock Transfer and Trust Company
("Continental"), to extend the business combination period up to three times for one month each time from January 8, 2024
to February 8, 2024, March 8, 2024 or April 8, 2024 (the "Third IMTA Amendment"). On January 3, 2024, we entered into the
Third IMTA Amendment with Continental. Our stockholders also approved an amendment (the "Third Charter Amendment") to our
amended and restated certificate of incorporation, as amended by the First Amendment dated December 20, 2022 and the Second Amendment
dated July 7, 2023 (as amended by the Third Charter Amendment, the "PBAX Charter") the to provide its board of directors the
ability to extend the date by which we have to consummate a business combination up to three times for one month each time, for a maximum
of three additional months. On January 3, 2024, we filed the Third Charter Amendment with the Secretary of State of the State of Delaware,
which was subsequently corrected by a Certificate of Correction (the "Certificate of Correction") dated January 4, 2024 to
correct certain scrivener's errors in the Third Charter Amendment.
In connection with the approval
of the Third Charter Amendment, holders of 11,625 shares of our Class A Common Stock, exercised redemption rights. As a result, following
satisfaction of such redemptions, we had 6,234,582 shares of Class A Common Stock outstanding, of which (i) 753,332 were shares of Class
A Common Stock issued to the public in our Initial Public Offering, which shares of Class A Common Stock were entitled to receive a pro
rata portion of the remaining funds in our trust account (the "Trust Account") in connection with our initial business combination,
a liquidation or certain other events, (ii) 4,596,250 were shares of Class A common stock issued upon the conversion of an equal number
of shares of our Class B common stock, par value $0.0001 per share ("Class B Common Stock"), acquired by the Sponsor prior
to our Initial Public Offering, which shares of Class A Common Stock did not have redemption rights, and (iii) 885,000 were shares of
Class A Common Stock included in the Private Placement Units acquired in the private placement by the Sponsor and other investors concurrent
with our Initial Public Offering, which shares of Class A Common Stock did not have redemption rights.
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On January 4, 2024, the Sponsor
deposited $22,600 in the Trust Account in connection with the extension of the business combination deadline. On January 4, 2024, we made
a series of payments of an aggregate of $128,133 to holders of redeemed Class A Common Stock (an aggregate of $11.02 per redeemed share).
On February 5, 2024, the
parties entered into Amendment No. 1 to the Business Combination Agreement to, among other things, (i) remove the minimum cash condition,
(ii) modify the stock-price based milestones such that (a) the trading price condition for the First Level Earnout Target (as defined
in the Business Combination Agreement) shall be reset from $12.50 to 125% of the conversion price of the Series A Preferred Stock upon
the reset of such conversion price and (b) the trading price condition for the Second Level Earnout Target shall be reset from $15.00
to 150% of the conversion price of the Series A Preferred Stock upon reset of such conversion price, and (iii) increase the aggregate
number of shares of Class A Common Stock issuable to the stockholders of CERo in connection with the Business Combination from 4,651,704
shares to 5,000,000 shares. Such number of shares is in addition to up to 1,200,000 shares issuable upon satisfaction of certain earn-out
conditions and 382,651 shares issuable upon exercise of rollover options or warrants.
On February 8, 2024, we held
a special meeting of stockholders (the "Fourth Special Meeting"). At the Fourth Special Meeting, our stockholders adopted
and approved: (i) the Business Combination Agreement, pursuant to which Merger Sub merged with and into Legacy CERo, with Legacy CERo
surviving the merger as a wholly-owned subsidiary of PBAX and approved the Business Combination and the other transactions and ancillary
documents contemplated by and required for the Business Combination; (ii) on a non-binding advisory basis, certain changes to the PBAX
Charter, including the name change to CERo Therapeutics Holdings, Inc., share authorizations, and others; (iii) the issuance of Class
A Common Stock to Legacy CERo Stockholders pursuant to the Business Combination Agreement; (iv) the election of five directors; and (v)
the 2024 Equity Incentive Plan and the 2024 Employee Stock Purchase Plan, contingent of the consummation of the Business Combination.
In connection with the approval
of the Business Combination, holders of 671,285 shares of Class A Common Stock, exercised redemption rights. As a result, following satisfaction
of such redemptions, we had 5,563,297 shares of Class A Common Stock outstanding, of which (i) 82,047 were shares of Class A Common Stock
issued to the public in our Initial Public Offering, which shares of Class A Common Stock were entitled to receive a pro rata portion
of the remaining funds in our Trust Account in connection with its initial business combination, a liquidation or certain other events,
(ii) 4,596,250 were shares of Class A Common Stock issued upon the conversion of an equal number of shares of our Class B Shares acquired
by Sponsor prior to our Initial Public Offering, which shares of Class A Common Stock did not have redemption rights, and (iii) 885,000
were shares of Class A Common Stock included in the Private Placement Units acquired in the private placement by the Sponsor and other
investors concurrent with our Initial Public Offering, which shares of Class A Common Stock did not have redemption rights. On February
14, 2024, we made a series of payments of an aggregate of $7,456,463.30 to holders of redeemed Class A Common Stock (an aggregate of $11.11
per redeemed share).
On February 13, 2024, the
parties entered into Amendment No. 2 to the Business Combination Agreement to create two additional pools of earnout shares of class A
common stock, one pool of which contained 875,000 shares, which were fully vested at closing of the Business Combination and which were
issued as an offset to the agreement by Sponsor to forfeit an offsetting number of shares, and one pool of which will contain 1,000,000
shares, which will be fully vested upon the achievement of certain regulatory milestone-based earnout targets and make certain other technical
changes to the timing and process for issuance of the 1,200,000 shares of Class A Common Stock subject to the other earn-out conditions
set forth in the Business Combination Agreement.
On February 14, 2024, the
Business Combination between Legacy CERo and PBAX was consummated pursuant to the Business Combination Agreement.
At the effective time of
the Business Combination, (i) each outstanding share of Legacy CERo common stock, (the "Legacy CERo common stock"), was cancelled
and converted into the right to receive shares of Class A Common Stock; (ii) each outstanding option to purchase Legacy CERo common stock
was converted into an option to purchase shares of Class A Common Stock; (iii) each outstanding share of CERo preferred stock, was converted
into the right to receive shares of Class A Common Stock, and (iv) each outstanding warrant to purchase Legacy CERo warrants was converted
into a warrant to acquire shares of Class A Common Stock. In addition, each outstanding Legacy CERo convertible bridge note was exchanged
for shares of Series A Preferred Stock.
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In addition, the holders
of Legacy CERo common stock and Legacy CERo preferred stock have the contingent right to receive additional shares of Class A Common Stock
(the "Earnout Shares"). At the Closing we issued three pools of shares subject to forfeiture if the applicable conditions
to transferability thereof are not satisfied: (i) 1,200,000 shares of Class A Common Stock, which will be fully vested upon the achievement
of certain adjusted stock price-based earnout targets or upon a qualifying transaction (ii) 875,000 shares of Common Stock, pursuant to
a Letter Agreement, dated as of February 14, 2024 (the "Sponsor Share Forfeiture Agreement") which were fully vested at Closing
of the Business Combination and which were issued as an offset to the Sponsor Share Forfeiture Agreement, and (iii) 1,000,000 shares of
Common Stock, which will be fully vested upon to achievement of certain regulatory milestone-based earnout targets.
As consideration for the
Business Combination, we issued to Legacy CERo Stockholders an aggregate of 7,597,638 shares of Class A Common Stock, including 2,200,000
Earnout Shares and 382,651 shares issuable upon exercise of rollover options or warrants.
On February 14, 2024, we
sold 10,039 shares of Series A Preferred Stock, 612,746 Series A Warrants and 2,500 Preferred Warrants pursuant to the First Securities
Purchase Agreement for aggregate cash proceeds of approximately $8.0 million, plus additional cash proceeds of $2.0 million on the mandatory
exercise of the Preferred Warrants upon the registration of the underlying shares of Common Stock. A portion of the issued Series A Preferred
Stock were issued as condition for extinguishment of indebtedness.
On February 14, 2024, we
entered into the Keystone Equity Financing with an investor which allows us to elect at our sole discretion to sell and issue, up to the
lesser of $25 million or a limit determined by maximum ownership percentages. As consideration for executing this agreement, we refunded
$1 million of the proceeds of the Series A financing to the investor and $150,000 to investor counsel.
On February 23, 2024, we
entered into the Arena Equity Financing with an investor which allows us to elect at our sole discretion to sell and issue, up to the
lesser of $25 million or a limit determined by maximum ownership percentages following the termination of the Keystone Equity Financing,
including as a result of the sale of the maximum amount permitted under such Keystone Equity Financing or the expiration of the Keystone
Equity Financing at the end of its three-year term. As consideration for executing this agreement, we will issue $500,000 of Common Stock
with a per share price determined by the five-day volume weighted average daily common share price on the five days preceding the effectiveness
of the registration statement that includes the shares pursuant to the purchase agreement.
On April 1, 2024, we sold
626 shares of Series B Preferred Stock pursuant to the Second Securities Purchase Agreement for aggregate cash proceeds of approximately
$0.5 million.
Results of Operations
As of December 31, 2023,
we had not commenced any operations. All activity through December 31, 2023 relates to our formation, the Initial Public Offering, and
since the Initial Public Offering, the search for a prospective initial business combination. We will not generate any operating revenues
until after the completion of a business combination, at the earliest. We generate non-operating income in the form of interest income
from the proceeds derived from the Initial Public Offering placed in the Trust Account.
For the year ended December
31, 2023, we had a net loss of $2,536,233, which primarily consists of operating expenses of $2,892,935 and Delaware franchise taxes of
$40,050, partially offset by the interest earned on marketable securities held in Trust Account of $491,571.
For the year ended December
31, 2022, we had a net loss of $667,736, which primarily consists of operating expenses of $2,841,391 and Delaware franchise taxes of
$64,050, partially offset by the interest earned on marketable securities held in Trust Account of $2,836,864.
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Liquidity and Going Concern
On October 8, 2021,
we consummated the Initial Public Offering of 17,500,000 units ("Units"), at a price of $10.00 per Unit, which included the
partial exercise by the underwriter of its over-allotment option in the amount of 2,000,000 Units, generating gross proceeds of $175,000,000.
Simultaneously with the closing of the Initial Public Offering, we consummated the sale of 885,000 units (the "Private Placement
Units") to the Sponsor, Cantor Fitzgerald & Co. ("Cantor") and Cohen & Company Capital Markets, a division of
J.V.B. Financial Group, LLC ("CCM"), at a price of $10.00 per Private Placement Unit, generating gross proceeds of $8,850,000.
Following the Initial Public
Offering, the partial exercise of the over-allotment option and the sale of the Private Placement Units, a total of $178,500,000 was placed
in the Trust Account ($10.20 per Unit). We incurred $12,729,318 in transaction costs, including $2,635,000 of underwriting fees, $9,150,000
of deferred underwriting fees and $944,318 of other offering costs.
As of December 31, 2023,
we had $96,873 in our operating bank accounts, $8,436,311 in money market funds held in Trust Account to be used for a business combination
or to repurchase or redeem our Public Shares in connection therewith and a working capital deficit of $5,049,122.
For the year ended December
31, 2023, there was $1,523,604 of cash used in operating activities.
For the year ended December
31, 2022, there was $1,092,247 of cash used in operating activities.
We used substantially all
of the funds held in the Trust Account, including any amounts representing interest earned on the Trust Account (less taxes payable),
to complete our Business Combination, including the payment of transaction costs.
In order to finance transaction
costs in connection with a business combination, our Sponsor or an affiliate of our Sponsor or certain of our officers and directors may,
but are not obligated to, loan us funds as may be required. If we complete a business combination, we may repay such loaned amounts out
of the proceeds of the Trust Account released to us. In the event that a business combination does not close, we may use a portion of
the working capital held outside the Trust Account to repay such loaned amounts, but no proceeds from our Trust Account would be used
for such repayment. Up to $1,500,000 of such loans may be converted into units of the post business combination entity, at a price of
$10.00 per unit, at the option of the lender. The units would be identical to the Private Placement Units. On December 13, 2022,
we entered into a promissory note with the Sponsor. In order to fund ongoing operations, the Sponsor will loan up to $1,500,000 to us.
On December 8, 2023, the Promissory Note was amended to increase the aggregate amount from $1,500,000 to $1,600,00. As of December 31,
2023 and 2022, there was $1,555,000 and $650,000 of outstanding borrowings under the working capital loan arrangement, respectively. On
February 14, 2024, the Sponsor surrendered the Promissory Note to us in payment of its subscription price for Series A Preferred Stock
in the financing transaction described above.
Our ability to continue as
a going concern is dependent on its ability to raise additional capital to fund its R&D activities and meet its obligations on a timely
basis. Since inception, we have incurred net losses and operating cash flow deficits, resulting in an accumulated deficit of $43.3 million
as of December 31, 2023. On February 14, 2024, we acquired the assets of CERo Therapeutics, Inc., closed the PIPE Financing with
gross proceeds of $9.8 million, and assumed the R&D operations of Legacy CERo. Additional funds are necessary to maintain current
operations and to continue R&D activities. However, there can be no assurance that sufficient funding will be available to allow us
to successfully continue its R&D activities and planned regulatory filings with the FDA. If we are unable to obtain necessary funds,
significant reductions in spending and the delay or cancellation of planned activities may be necessary. These actions would have a material
adverse effect on our business, results of operations, and prospects. These conditions raise substantial doubt about our ability to continue
as a going concern within one year from the date these financial statements are issued. The accompanying financial statements do not include
any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities
that might result from the outcome of this uncertainty.
Contractual Obligations
We do not have any long-term
debt, capital lease obligations, operating lease obligations or long-term liabilities, other than an agreement to pay the Sponsor or an
affiliate of the Sponsor a monthly fee of $20,000 for office space, administrative and shared personnel support services to us. We began
incurring these fees on October 6, 2021 and incurred these fees monthly through December 31, 2022. The payment of these fees
was suspended on December 31, 2022 and reinstated on March 31, 2023. As of December 31, 2023, there was a $75,000 outstanding
balance owed to the Sponsor.
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We entered into an agreement,
commencing on the date of our listing on Nasdaq, to pay the spouse of our Chief Executive Officer a monthly consulting fee of $15,000
for assisting us in identifying and evaluating potential acquisition targets. Payment of the consulting fees ended on December 31,
2022 as part of the first charter amendment approval.
In addition, we have an agreement
to pay the underwriter a deferred fee of $9,150,000. The deferred fee will become payable to the representative from the amounts held
in the Trust Account solely in the event that we complete a business combination, subject to the terms of the underwriting agreement.
Prior to Closing the Business Combination, we entered into a fee modification agreement with the underwriter, pursuant to which the underwriter
received shares of Common Stock in lieu of certain cash payments.
Critical Accounting Policies
The preparation of financial
statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets
and liabilities at the date of the financial statements, and income and expenses during the periods reported. Actual results could materially
differ from those estimates. We have identified the following critical accounting policies:
Accounting for Public Warrants
We account for Public Warrants
as either equity-classified or liability-classified instruments based on an assessment of the instruments' specific terms and applicable
authoritative guidance in ASC 480 and ASC 815, Derivatives and Hedging ("ASC 815"). The assessment considers whether the instruments
are free standing financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments
meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to our own Common
Stock and whether the instrument holders could potentially require "net cash settlement" in a circumstance outside of our
control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, was conducted
at the time of warrant issuance and as of each subsequent period end date while the instruments are outstanding. Management has concluded
that the Public Warrants issued pursuant to the warrant agreement qualify for equity accounting treatment.
Common Stock Subject to Possible Redemption
We account for our Common
Stock subject to possible redemption in accordance with the guidance in ASC Topic 480 "Distinguishing Liabilities from Equity."
Common stock subject to mandatory redemption is classified as a liability instrument and is measured at fair value. Conditionally redeemable
common stock (including common stock that features redemption rights that are either within the control of the holder or subject to redemption
upon the occurrence of uncertain events not solely within our control) is classified as temporary equity. At all other times, common stock
is classified as stockholders' equity. Our Common Stock features certain redemption rights that are considered to be outside of
our control and subject to occurrence of uncertain future events. Accordingly, Common Stock subject to possible redemption is presented
as temporary equity, outside of the stockholders' deficit section of our balance sheets. We recognize changes in redemption value
immediately as they occur and adjust the carrying value of redeemable common stock to equal the redemption value at the end of each reporting
period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges against additional paid in capital
and accumulated deficit.
Net Loss per Common Share
Net loss per share is computed
by dividing net loss by the weighted average number of shares of common stock outstanding during the period. At December 31, 2023, we
did not have any dilutive securities and/or other contracts that could, potentially, be exercised or converted into shares of common stock
and then share in our earnings. As a result, diluted net loss per share is the same as basic net loss per share for the period presented.
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Recent Accounting Standards
In December 2023, the Financial
Accounting Standard Board ("FASB") FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures
("ASU 2023-09"), which requires disclosure of incremental income tax information within the rate reconciliation and expanded
disclosures of income taxes paid, among other disclosure requirements. ASU 2023-09 is effective for fiscal years beginning after December
15, 2024. Early adoption is permitted. Management does not believe the adoption of ASU 2023-09 will have a material impact on its consolidated
financial statements and disclosures.
In June 2016, the FASB issued
Accounting Standards Update ("ASU 2016-13")
Financial Instruments – Credit Losses (Topic 326): Measurement
of Credit Losses on Financial Instruments ("ASU 2016-13")
. This update requires financial assets measured at amortized
cost basis to be presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant
information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect
the collectability of the reported amount. Since June 2016, the FASB issued clarifying updates to the new standard including changing
the effective date for smaller reporting companies. The guidance is effective for fiscal years beginning after December 15, 2022,
and interim periods within those fiscal years, with early adoption permitted. We adopted ASU 2016-13 on January 1, 2023. The
adoption of ASU 2016-13 did not have an impact on our financial statements.
Management does not believe
that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying
financial statements.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF CERO
The following Management's
Discussion and Analysis of Financial Condition and Results of Operations provides information which CERo Therapeutics Holdings, Inc. ("the
Company") management believes is relevant to an assessment and understanding of its results of operations and financial condition.
The discussion should be read together with
the Company
's financial statements and related notes that are presented above.
This Management's Discussion and Analysis of Financial Condition and Results of Operations may contain forward-looking statements
based upon current expectations that involve risks and uncertainties. Actual results may differ materially from those anticipated in these
forward-looking statements resulting from various factors. Please see "Cautionary Note Regarding Forward Looking Statements"
and "Risk Factors" in the Company's Annual Report on Form 10-K for the year ended December 31, 2023), filed with the
Securities and Exchange Commission (the "SEC"). Unless the context otherwise requires, references in this section to "Predecessor"
is intended to mean the business and operations of CERo Therapeutics, Inc. prior to the Merger.
Overview
CERo Therapeutics, Inc. (Predecessor)
was incorporated in Delaware on September 23, 2016, and is based in South San Francisco, California. Predecessor was focused on developing
its therapeutic platform to genetically engineer human immune cells to fight cancer and did not begin clinical development or product
commercialization. The Company's efforts will focus on continued product development, including clinical development, to support
regulatory approval to commercialize and subsequent product commercialization.
On June 4, 2023, Predecessor
entered into a Business Combination Agreement (as amended by that certain Amendment No. 1 to the Business Combination Agreement, dated
as of February 5, 2024 and Amendment No. 2 to the Business Combination Agreement, dated as of February 13, 2024, the "Business Combination
Agreement") by and among PBAX and PBCE Merger Sub, Inc. ("Merger Sub"), pursuant to which Merger Sub merged with and
into Predecessor, with Predecessor surviving as a wholly-owned subsidiary of PBAX (the "Merger"). In connection with the consummation
of the Business Combination on February 14, 2024, PBAX changed its corporate name to "CERo Therapeutics Holdings, Inc."
At the effective time of
the Merger, (i) each outstanding share of Predecessor common stock, was cancelled and converted into the right to receive shares of Common
Stock; (ii) each outstanding option to purchase Predecessor common stock was converted into an option to purchase shares of Common Stock,
par value $0.0001 per share; (iii) each outstanding share of Predecessor preferred stock, was converted into the right to receive shares
of Common Stock, and (iv) each outstanding warrant to purchase Predecessor preferred stock was converted into a warrant to acquire shares
of Common Stock. In addition, each outstanding Predecessor convertible bridge note was exchanged for shares of Series A Preferred Stock.
In addition, the holders
of Predecessor common stock and Predecessor preferred stock have the contingent right to receive the Earnout Shares. At the Closing, the
Company issued three pools of shares of Common Stock subject to forfeiture if the applicable conditions to transferability thereof are
not satisfied: (i) 1,200,000 shares of Common Stock, which will be fully vested upon the achievement of certain adjusted stock price-based
earnout targets or upon a qualifying transaction (ii) 875,000 shares of Common Stock, pursuant to a Letter Agreement, dated as of February
14, 2024 which were fully vested at Closing of the Merger and which were issued as an offset to the Sponsor Share Forfeiture Agreement,
and (iii) 1,000,000 shares of Common Stock, which were fully vested upon the June 28, 2024 achievement of certain regulatory milestone-based
earnout targets.
As consideration for the
Merger, the Company issued to Predecessor stockholders an aggregate of 7,597,638 shares of Common Stock, including 2,200,000 Earnout Shares
and 382,651 shares issuable upon exercise of rollover options or warrants.
129
February 2024 PIPE Financing
In February 2024, the Company
consummated the first tranche of a private placement of 10,039 shares of the Series A Preferred Stock, issuance of common warrants to
purchase 612,746 shares of Common Stock and warrants to purchase 2,500 shares of Series A Preferred Stock, pursuant to the Amended and
Restated Securities Purchase Agreement, dated February 14, 2024, by and among Predecessor, PBAX and certain accredited investors for aggregate
cash proceeds to the Company of approximately $10.0 million, including cash previously received for bridge loan proceeds. A portion of
the Series A Preferred Stock was issued as consideration for the cancellation of outstanding indebtedness or securities of Predecessor
or PBAX, including a promissory note of PBAX and certain convertible bridge notes of Predecessor. Such transactions collectively are referred
to as the "February 2024 PIPE Financing."
April 2024 PIPE Financing
On April 1, 2024, the Company
consummated a private placement of 626 shares of the Series B Preferred Stock, pursuant to the Securities Purchase Agreement, dated March
28, 2024, by and among the Company and certain accredited investors, for aggregate cash proceeds to the Company of approximately $0.5
million (the "April 2024 PIPE Financing").
September 2024 PIPE Financing
In September 2024, the Company
consummated a private placement of 2,853 shares of the Series C Preferred Stock with common warrants to purchase 8,175,166 shares of Common
Stock pursuant to the Securities Purchase Agreement, dated September 25, 2024, by and among certain accredited investors for aggregate
cash proceeds to the Company of approximately $1.25 million.
Investigational New Drug Application Submission
On June 28, 2024, the Company
submitted an Investigational New Drug Application ("IND") for its product candidate, CER-1236, to FDA. On July 26, 2024, the
Company was informed by the FDA that it has placed a clinical hold on the IND. The FDA indicated that the clinical hold has been placed
as a result of insufficient data provided with regard to two issues within pharmacology and toxicology of CER-1236. The FDA indicated
that, within 30 calendar days, it would provide a detailed official hold letter and requested that the Company hold its response until
after receipt of such letter (the "Hold Letter").
The Company received the
Hold Letter on July 26, 2024 and submitted a complete response letter to the FDA on October 21, 2024 in which the Company requested a
meeting to address the FDA's questions.
On November 15, 2024, the
Company received notice from the FDA that the IND for CER-1236 was cleared. The Company continues to believe that it will be able to initiate
the planned clinical trial by early 2025.
Nasdaq Notices of Non-compliance
On July 19, 2024, the Company
received a letter (the "Bid Price Requirement Letter") from the staff at The Nasdaq Global Market ("Nasdaq") notifying
the Company that, for the 30 consecutive trading days prior to the date of the Bid Price Requirement Letter, the closing bid price for
the Common Stock has been below the minimum $1.00 per share required for continued listing on Nasdaq set forth in Nasdaq Listing Rule
450(a)(1), which is required for continued listing of the Common Stock on Nasdaq (the "Bid Price Requirement"). On October
23, 2024, the trading price for CERo common stock closed under $0.10 and was the tenth consecutive trading day to do so. On October 24,
2024, the Company received a letter from the staff at Nasdaq notifying the Company that, because its Common Stock had a closing bid price
of $0.10 or less for ten consecutive trading days, it was no longer eligible to rely upon the 180-day cure period set forth in the Bid
Price Requirement Letter.
On July 19, 2024, the Company
also received a letter (the "MVPHS Letter") from Nasdaq notifying the Company that the "Market Value of Publicly Held
Shares" (the "MVPHS") of the Common Stock had been below the minimum of $15,000,000 for the last 30 consecutive business
days prior to the date of the MVPHS Letter, which is required for continued listing of the Common Stock on Nasdaq (the "MVPHS Requirement").
130
Such letters are in addition
to the letter from Nasdaq received by the Company on May 2, 2024 (the "MVLS Letter" and, together with the Bid Price Letter
and the MVPHS Letter, the "Letters") notifying the Company that, for the 30 consecutive trading days prior to the date of
such MVLS Letter, the Common Stock had traded at a value below the minimum $50,000,000 "Market Value of Listed Securities"
("MVLS") requirement set forth in Nasdaq Listing Rule 5450(b)(2)(A), which is required for continued listing of the Common
Stock on Nasdaq (the "MVLS Requirement" and, together with the Bid Price Requirement and the MVPHS Requirement, the "Requirements").
On October 30, 2024, the Company received a letter from the staff at Nasdaq notifying the Company that it had not regained compliance
with the MVLS Requirement within the 180-day compliance period set forth in the MVLS Letter.
Each of the Bid Price Requirement
and MVLS Requirement deficiencies results in the commencement of delisting proceedings. However, the Company has requested a hearing from
Nasdaq and plans to submit a plan to regain compliance with the listing requirements at such hearing. Notwithstanding that applicable
Nasdaq rules provide a 180-day compliance period to regain compliance with the MVPHS Requirement, the plan submitted by the Company in
connection with such hearing will be required to demonstrate a pathway to compliance with all applicable deficiencies.
The Company intends to evaluate
available options to resolve these deficiencies and regain compliance with the Requirements. Such options may include seeking to qualify
for continued listing under a different continued listing standard of the Nasdaq Global Market or Nasdaq Capital Market, in lieu of the
MVPHS and MVLS requirements, including the Equity Standard, if the Company has sufficient stockholders' equity at such time. While
the Company is exercising diligent efforts to maintain the listing of its securities on Nasdaq, there can be no assurance that the Company
will be able to regain or maintain compliance with Nasdaq listing standards.
On November 11, 2024, the
Company's stockholders approved a reverse stock split ranging from 1:25 to 1:150. The stockholder approval of the reverse stock
split provides the Board of Directors with the authority to determine the exact ratio of the reverse stock split and implement such reverse
stock split within a year after the date of such approval. The Board of Directors expects to determine the ratio and implement the reverse
stock split prior to the Nasdaq hearing. Although such reverse stock split is expected to enable regaining compliance with the Bid Price
Requirement, it is not intended to contribute to regaining compliance with the other Requirements.
Factors Affecting Our Performance
The Company believes that
its performance and future success depend on several factors that present significant opportunities for the Company but also pose risks
and challenges. These include, among others:
●
the extent to which the Company develops, in-licenses or acquires other product candidates and technologies in its product candidate pipeline;
●
the costs and timing of process development and manufacturing scale-up activities associated with the Company's product candidates and other programs as the Company advances them through preclinical and clinical development;
●
the number and development requirements of product candidates that the Company may pursue;
●
the costs, timing and outcome of regulatory review of the Company's product candidates;
●
the Company's potential headcount growth and associated costs as it expands its R&D capabilities,  maintains the administrative functions required for a publicly traded company, and establishes and expands its commercial infrastructure and operations;
●
the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for any of the Company's product candidates for which the Company receives market approval;
●
the revenue, if any, received from commercial sales of the Company's product candidates for which it receives marketing approval;
●
competition from other similar product candidates; and,
●
ability to raise sufficient capital to maintain operations.
131
Components of Results of Operations
Revenue
Predecessor and the Company
have not recognized any revenue from any sources, including from product sales, and the Company does not expect to generate any revenue
from the sale of products in the foreseeable future. If the development efforts for the Company's product candidates, each of which
is a specific product and indication combination, are successful and result in regulatory approval, or if the Company executes license
agreements with third parties, the Company may generate revenue from R&D services, from the achievement of development milestones
or from milestones and royalties related to product sales. However, there can be no assurance as to when any revenues will be generated,
if at all.
Operating Expenses
Research and Development Expenses
R&D expenses consist
of discovery activities, manufacturing development and production, preclinical and clinical development, and regulatory filing for product
candidates. R&D expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in R&D
are capitalized until the goods or services are received. Costs incurred in obtaining technology licenses through asset acquisitions,
if incurred, will be charged to R&D expense if the licensed technology has not reached technological feasibility and has no alternative
future use. R&D expenses include or could include:
●
employee-related expenses, including salaries, bonuses, benefits, stock-based compensation and other related costs for those employees involved in R&D efforts;
●
external R&D expenses incurred under agreements with pre-clinical research organizations, clinical research organizations, investigative sites, centralized clinical laboratories, and consultants to conduct preclinical and clinical studies;
●
costs related to manufacturing material for preclinical studies and clinical trials, including fees paid to contract development and manufacturing organizations;
●
product-liability insurance for clinical development product(s);
●
laboratory supplies and research materials;
●
software and systems related to R&D activities;
●
costs related to regulatory filing and compliance; and
●
facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent, maintenance of facilities, and equipment.
132
Product candidates in later
stages of development generally have higher development costs than those in earlier stages of clinical development, primarily due to
the increased size and duration of later-stage clinical trials. The Company plans to substantially increase its R&D expenses for
the foreseeable future as it continues the development of its product candidates through clinical development. The Company cannot determine
with certainty the timing of initiation, the duration or the costs of current or future preclinical studies and clinical trials required
for regulatory approval due to the inherently unpredictable nature of preclinical and clinical development. Clinical and preclinical
development timelines, the probability of success and development costs can differ materially from expectations. The Company anticipates
that it will make determinations as to which product candidates to pursue and how much funding to direct to each product candidate on
an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and
ongoing assessments as to each product candidate's commercial potential. The Company will need to, and plans to, raise substantial
additional capital in the future. Future R&D expenses may vary significantly between periods and from current expectations based
on factors such as:
●
expenses incurred to conduct preclinical studies required to advance product candidates into clinical trials;
●
per patient clinical trial costs based on a number of factors, including number of patient clinical visits, clinical laboratory testing, and potential medical imaging;
●
the number of clinical trials required for approval, the number of patients who enroll in each clinical trial, and the number and geographic locations of sites included in the clinical trials;
●
the length of time required to screen and enroll eligible patients, screen-failure rate, or the discontinuation rates of enrolled patients;
●
potential additional safety monitoring requested by regulatory agencies;
●
the cost of insurance, including product liability insurance, in connection with clinical trials; and
●
suspension or termination of clinical development activities by regulators or institutional review boards for various reasons, including regulatory noncompliance or a finding that the participants are being exposed to unacceptable health risks.
General and Administrative Expenses
General and administrative
expenses consist principally of salaries and related costs for personnel in executive and administrative functions, including stock-based
compensation, travel expenses and recruiting expenses. Other general and administrative expenses include professional fees for legal,
accounting and tax-related services and insurance costs.
The Company anticipates that
its general and administrative expenses will increase in the future as the Company increases headcount and contracted services for operational
support for expanded operations and infrastructure. The Company also anticipates that general and administrative expenses will increase
as a result of expenses for accounting, audit, legal and consulting services, as well as costs associated with maintaining compliance
with Nasdaq listing rules and SEC requirements, director and officer liability insurance, investor and public relations activities and
other expenses associated with operating as a public company.
Interest and Other Income, Net
Interest and other income,
net consists predominantly of interest income from interest bearing bank accounts, interest expense on payables, and the gain or loss
on the revaluation of derivative liabilities, which represents the change in fair value of earnout liabilities or outstanding warrants
between periods.
133
Results of Operations for the three-months
ended September 30, 2024 and 2023
CERO THERAPEUTICS HOLDINGS, INC.
Condensed
Consolidated
STATEMENTS OF OPERATIONS
(Unaudited)
For the three months ended
September 30,
2024
2023
(Successor)
(Predecessor)
Difference
Operating expenses:
Research and development
$
1,774,210
$
1,277,558
$
496,652
General and administrative
2,628,028
258,013
2,370,015
Total operating expenses
4,402,238
1,535,571
2,866,667
Loss from operations
(4,402,238
)
(1,535,571
)
(2,866,667
)
Other expense
(147
)
-
(147
)
Change in fair value of derivative liabilities
170,000
186,067
(16,067
)
Interest income, net
4,418
157
4,261
Total other income
174,271
186,224
(11,953
)
Net loss
$
(4,227,967
)
$
(1,349,347
)
$
(2,878,620
)
General and Administrative Expenses
General and administrative
expenses were $2.6 million for the three-month period ended September 30, 2024 compared to $0.3 million for the three-month period ended
September 30, 2023, reflecting an increase of $2.4 million. The increase in the three-month period ended September 30, 2024, over the
three-month period ended September 30, 2023, was predominantly due to the expenses associated with operating as a publicly traded company.
The hiring of senior management in G&A resulted in an increase of $0.4 million in the three-month period ended September 30, 2024,
versus the three-month period ended September 30, 2023, and expenses associated with public company filings and financings increased legal
expenses $1.0 million, and accounting and filing-associated expenses $0.2 million in the three-month period ended September 30, 2024,
versus the three-month period ended September 30, 2023. Business consulting services and directors' fees increased $0.5 million
in the three-month period ended September 30, 2024, versus the three-month period ended September 30, 2023. Public company insurance coverage
increased insurance expenses $0.1 million in the three-month period ended September 30, 2024, versus the three-month period ended September
30, 2023. Other expenses, including corporate communication expenses, recruiting expenses, IT expenses, and travel costs increased $0.2
million in the three-month period ended September 30, 2024, versus the three-month period ended September 30, 2023.
Research and Development Expenses
Research and development
expenses were $1.8 million for the three-month period ended September 30, 2024 compared to $1.3 million for the three-month period ended
September 30, 2023, reflecting an increase of $0.5 million. The increase was related to increased research and development activity as
the Company addressed regulatory questions related to the IND for CER-1236 and prepared for the clinical trial, anticipated to start after
the clinical hold for CER-1236 is lifted. Clinical expenses increased $0.2 million, manufacturing increased by $0.1 million and research
and development consulting increased by $0.3 million, offset by a reduction of $0.2 million in compensation expenses and the scientific
operations were conducted with more consulting and fewer employees in the three-month period ended September 30, 2024, versus the three-month
period ended September 30, 2023. The remaining $0.1 million increase in the three-month period ended September 30, 2024, over the three-month
period ended September 30, 2023, was related to lab supplies and expenses, additional pre-clinical work and facilities rent escalation.
The Company anticipates that
its R&D expenses will significantly increase in the future as the Company increases headcount, compensation expense, and contracted
services for preclinical and clinical development of its product candidates, as well as for manufacturing of product to be used in clinical
development.
Other Income
Other income was $0.2 million
for the three-month period ended September 30, 2024 and 2023. The immaterial change was related to higher interest income and slightly
lower gain from revaluation of liabilities in the three-month period ended September 30, 2024, versus the three-month period ended September
30, 2023.
134
Results of Operations for the nine-months ended
September 30, 2024 and 2023
The Results of Operations
for the nine-month period ended September 30, 2024 are
pro forma
as the period presented in the following table and discussion
includes the Predecessor for the period from January 1, 2024 through February 13, 2024 and the Company for the period from February 14,
2024 through September 30, 2024. This pro forma period from January 1, 2024 to September 30, 2024 does not include the Merger transactions
that occurred on-the-line.
CERO THERAPEUTICS HOLDINGS, INC.
Condensed
Consolidated
STATEMENTS OF OPERATIONS
(Unaudited)
For the nine months ended
September 30,
2024
(
Pro
    forma,
Predecessor and Successor)
2023
(Predecessor)
Difference
Operating expenses:
Research and development
$
6,156,761
$
4,270,472
$
1,886,289
General and administrative
7,945,784
2,283,404
5,662,380
Total operating expenses
14,102,545
6,553,876
7,548,669
Loss from operations
(14,102,545
)
(6,553,876
)
(7,548,669
)
Gain from settlement of liabilities with vendor
589,223
-
589,223
Other expense
(630,922
)
-
(660,922
)
Change in fair value of derivative liabilities
5,190,117
411,230
4,778,887
Interest expense, net
(22,188
)
118,251
(140,439
)
Total other income
5,126,230
529,481
4,596,749
Net loss
$
(8,976,315
)
$
(6,024,395
)
$
(2,951,920
)
General and Administrative Expenses
General and administrative
expenses were $7.9 million for the nine-month period ended September 30, 2024, compared to $2.3 million for the nine-month period ended
September 30, 2023, reflecting an increase of $5.7 million. The increase in the nine-month period ended September 30, 2024, over the nine-month
period ended September 30, 2023, was predominantly due to a $1.8 million expense consisting of the remaining underwriting fees from the
PBAX initial public offering, which were earned on the consummation of the business combination. Additionally, the hiring of senior management
in G&A resulted in an increase of $1.6 million, including recruiting fees. Legal fees increased $0.8 million and business consulting
increased $0.3 million in the nine-month period ended September 30, 2024, versus the nine-month period ended September 30, 2023. Expenses
related to services required for SEC compliance, such as printing and transfer agency fees, increased $0.4 million and public company
insurance coverage increased insurance expenses $0.4 million in the nine-month period ended September 30, 2024, compared to the nine-month
period ended September 30, 2023. Corporate communications and director fees each increased $0.2 million in the nine-month period ended
September 30, 2024 compared to the nine-month period ended September 30, 2023. The additional expenses are all driven by the increased
expenses of operational compliance as a public company.
Research and Development Expenses
Research and development
expenses were $6.2 million for the nine-month period ended September 30, 2024, compared to $4.3 million for the nine-month period ended
September 30, 2023, reflecting an increase of $1.9 million. The increase was related to increased R&D activity as the Company prepared
and filed the IND for CER-1236, prepared for the clinical trial initiation, and conducted additional experiments in response to the FDA
questions related to the IND. Compensation increased $0.1 million, clinical expenses increased $0.2 million, and consulting expenses increased
$0.9 million in the nine-month period ended September 30, 2024, due to activities related to the preparation of the IND and responses
to questions from FDA, and preparation for the anticipated clinical trial for CER-1236. To complete the IND application, multiple manufacturing
runs were necessary, increasing manufacturing costs by $0.2 million in the nine-month period ended September 30, 2024, versus the nine-month
period ended September 30, 2023. Additional studies required to address FDA questions increased pre-clinical study costs by $0.3 million.
The remaining $0.2 million increase in the nine-month period ended September 30, 2024, versus the nine-month period ended September 30,
2023, was predominantly related to lab supplies and expenses and facilities rent escalation.
135
The Company anticipates that
its R&D expenses will significantly increase in the future as the Company increases headcount, compensation expense, and contracted
services for preclinical and clinical development of its product candidates, as well as for manufacturing of clinical product to be used
in clinical development.
Other Income
Other income was $5.1 million
for the nine-month period ended September 30, 2024, compared to $0.5 million for the nine-month period ended September 30, 2023, reflecting
an increase of $4.6 million. The increase in 2024 relative to 2023 was predominantly due to the $4.7 million change in value of the Company's
Earnout Liability in the nine-month period ended September 30, 2024. Settlement of vendor liabilities in 2024 resulted in a $0.6 million
increase in income in 2024, offset by an additional $0.1 million less interest income and $0.6 million other expense for the delayed S-1
penalty.
Results of Operations for the Year Ended
December 31, 2023 (Predecessor) as Compared to Year Ended December 31, 2022 (Predecessor)
2023
(Predecessor)
2022
(Predecessor)
Difference
Operating expenses:
Research and development
$
5,288,580
$
9,845,603
$
(4,557,023
)
General and administrative
2,386,469
2,125,628
260,841
Total operating expenses
7,675,049
11,971,231
(4,296,182
)
Loss from operations
(7,675,049
)
(11,971,231
)
4,296,182
Interest and other income, net
385,472
142,115
243,357
Net loss
$
(7,289,577
)
$
(11,829,116
)
$
4,539,539
General and Administrative Expenses
General and administrative
expenses were $2.39 million for the year ended December 31, 2023 compared to $2.13 million for the year ended December 31, 2022, reflecting
a decrease of $0.26 million. Compensation related expenses decreased $0.87 million in 2023 as compared to 2022, due primarily to reduced
headcount and recruiting expenses and reduction in software and other employee support expenses contributed $0.15 million to the 2023
decrease from 2022. Intellectual property expenses declined $0.66 million and public communication services expenses declined $0.42 million
in 2023 relative to 2022. These decreases in expenses were offset by a $1.41 million increase in legal, accounting, and business consulting
fees related to outsourced finance functions and activity related to preparation for the Business Combination.
Research and Development Expenses
R&D expenses were $5.29
million for the year ended December 31, 2023, compared to $9.85 million for the year ended December 31, 2022 reflecting a decrease of
$4.6 million. Compensation related expenses decreased $2.1 million in 2023 as compared to 2022, due primarily to reduced headcount and
recruiting expenses and reduction in software and other employee support expenses contributed $0.14 million to the 2023 decrease from
2022. Research activity slowed, resulting in a decrease of $1.84 million in supplies and external research service expenses in 2023 relative
to 2022. Manufacturing slowed in 2023 relative to 2022, causing contract manufacturing expense to decline $0.70 million in 2023 versus
2022. Partially offsetting these declines, we received $0.18 million less in expense reimbursements from a collaboration partner in 2023
compared to 2022.
136
We anticipate that its R&D
expenses will significantly increase in the future as we increase headcount and contracted services for preclinical and clinical development
of its product candidates, as well as for manufacturing of clinical product to be used in clinical development.
Interest and Other Income, Net
Interest and other income,
net increased $0.24 million, from $0.14 million in the year ended December 31, 2022 to $0.39 million in the year ended December 31, 2023.
The change was primarily due to a $0.25 million increase in the gain on the revaluation of the warrant liability from $0.04 million to
$0.29 million as of December 31, 2022, and 2023, respectively. This decrease was offset by a $0.01 million decrease in net interest income
from $0.10 to $0.09 million in the years ended December 31, 2022, and 2023, respectively.
Liquidity and Capital Resources
Capital Requirements
Predecessor and the Company
have not generated any revenue from any source and the Company does not expect to generate revenue for at least the next few years. If
the Company fails to complete the timely development of, or fails to obtain regulatory approval for, its product candidates, the ability
of the Company to generate future revenue will be adversely affected. The Company does not know when, or if, it will generate any revenue
from its product candidates, and does not expect to generate revenue unless and until the Company obtains regulatory approval and commercialization
of its product candidates.
The Company expects its expenses
to increase significantly in connection with its ongoing activities, particularly as it continues and expands research, preclinical development,
and clinical development to support marketing approval for its product candidates. In addition, if the Company obtains approval for any
of its product candidates, the Company expects to incur significant commercialization expenses related to sales, marketing, manufacturing
and distribution. Furthermore, the Company expects to incur additional costs associated with operating as a public company.
The Company, therefore, anticipates
that substantial additional funding will be needed in connection with its continuing operations. At September 30, 2024, the Company had
$3.4 million in cash, restricted cash and cash equivalents. The Company intends to devote most of the available cash to the preclinical
and clinical development of its product candidates and public company compliance costs. Based on current business plans, the Company believes
that the cash available at September 30, 2024 will not fund its operations and capital requirements for 12 months after the filing of
the unaudited financial statements for the nine-month period ended September 30, 2024. The Company has arranged two equity lines of credit,
one providing for the sale of up to 25,000,000 newly issued shares of Common Stock and the other providing for the purchase of up to $25
million of Common Stock on the satisfaction of certain conditions. At September 30, 2024, the Company had 2.8 million shares remaining
in the first ELOC, which was fully depleted on October 3, 2024, and $25 million remaining in the second ELOC, which was replaced with
a second ELOC arranged with the investor in the first ELOC (see Note 12 – Subsequent Events). The Company has no guarantee that
the conditions will be satisfied to require the purchase of all, or any additional amount, of the Equity Line of Credit ("ELOC")
funds. Any estimate as to how long the Company expects the net proceeds from the ELOC funding may fund the Company's operations
is based on assumptions that may prove to be wrong, and the Company could use its available capital resources sooner than its current
expectations. Changing circumstances, some of which may be beyond the Company's control, could result in less cash and cash equivalents
available to fund operations or cause the Company to consume capital significantly faster than currently anticipated, and the Company
may need to seek additional funds from additional sources sooner than planned.
Because of the numerous risks
and uncertainties associated with research, development and commercialization of pharmaceutical drug products, the Company is unable to
estimate the exact amount of its operating capital requirements. The Company's future funding requirements will depend on many factors,
including, but not limited to those listed under "Factors Affecting Our Performance" above.
137
Identifying potential product
candidates and conducting preclinical studies and clinical trials is a time-consuming, expensive and uncertain process that takes many
years to complete, and the Company may never generate the necessary data or results required to obtain marketing approval and achieve
product sales. In addition, the Company's product candidates, if approved, may not achieve commercial success. Commercial revenues,
if any, will be derived from sales of product candidates that the Company does not expect to be commercially available in the near term,
if at all. Accordingly, the Company will need to continue to rely on additional financing to achieve its business objectives. Adequate
additional financing may not be available to the Company on acceptable terms, or at all. To the extent that the Company raises additional
capital through the sale of equity or convertible debt securities, the terms of these equity securities or this debt may restrict the
Company's ability to operate. Any future debt financing and equity financing, if available, may involve covenants limiting and restricting
the ability to take specific actions, such as incurring additional debt, making capital expenditures, entering into profit-sharing or
other arrangements or declaring dividends. If the Company raises additional funds through collaborations, strategic alliances or marketing,
distribution or licensing arrangements with third parties, it may be required to relinquish valuable rights to its technologies, future
revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to the Company. If the
Company is unable to raise capital when needed or on acceptable terms, the Company could be forced to delay, reduce or eliminate its R&D
programs or future commercialization efforts.
Cash Flows
Nine Months Ended September 30, 2024 and
2023
For the nine months ended
September 30,
2024
(
Pro
    forma,
Predecessor and Successor)
2023
(Predecessor)
Difference
Net cash used in operating activities
$
(11,375,873
)
$
(4,829,217
)
$
(6,546,656
)
Net cash provided by financing activities:
12,240,682
571,679
11,669,003
Net increase (decrease) in cash and cash equivalents
$
864,809
$
(4,257,539
)
$
5,122,347
Net cash used in operating activities
Net cash used in operating
activities increased $6.6 million from $4.8 million to $11.4 million in the nine-month period ended September 30, 2023 and 2024 respectively.
The increase in cash used was largely related to having a $4.8 million increase in the adjustment to net loss related to the gain on the
revaluation of derivative liabilities. The difference in net loss reflected $3.0 million more cash being used, offset by a larger non-cash
adjustment for stock-based compensation of $1.9 million in the nine-month period ended September 30, 2024 versus 2023. The difference
of $0.1 million of cash resulting from increasing accounts payable and accruals was offset by $0.1 million increase in prepaid expenses
and $0.6 million in vendor settlements in the nine-month period ended September 30, 2024 versus 2023. The remaining difference was an
additional $0.1 million in adjustment to lease liability due to rent escalation.
Net cash provided by financing activities
Net cash provided by financing
activities increased $11.7 million from $0.6 million in the nine-month period ended September 30, 2023 to $12.2 million in the nine-month
period ended September 30, 2024. The increase was related to the net proceeds of $7.3 million from the issuance of Series A and B Preferred
Stock, the net proceeds of $0.7 million from the issuance of Series C Preferred Stock and associated warrants, the gross proceeds of $4.3
million for the sale of common stock under the ELOC, and $0.1 million related to net insurance financing. These increases in cash were
partially offset by the $0.6 million borrowing under the bridge loan in 2023, for which there was no equivalent in the nine-month period
ended September 30, 2024.
138
Years Ended December 31, 2023 and 2022
Net cash used in operating activities
Net cash used in operating
activities decreased $5.9 million from $11.7 million to $5.8 million in the years ended December 31, 2022, and 2023, respectively. Our
operating activities significantly slowed and headcount was reduced, resulting in a $4.5 million reduction in net loss in 2023 relative
to 2022, and an increase in accrued expenses and accounts payable of $2.1 million in 2023 relative to 2022 resulted in $6.6 million less
cash being expended in 2023 compared to 2022. The gain on the revaluation of the warrant liability resulted in a $0.25 million offset
and other non-cash components resulted in a $0.20 million offset to the decrease in the net loss in 2023 versus 2022.
Net cash used in investing activities
In the year ended December
31, 2022, we purchased $0.69 million of property and equipment, while no purchases were made in 2023. The majority of the purchases were
laboratory equipment.
Net cash provided by financing activities
Net cash provided in financing
activities increased $0.57 million from an immaterial amount to $0.57 million in the years ended December 31, 2022, and 2023, respectively.
The change was a result of the issuance of a bridge loan to investors that provided $0.57 million of net proceeds in 2023.
Contractual Obligations and Other Commitments
None.
Critical Accounting Policies and Significant
Judgments and Estimates
The preparation of financial
statements in conformity with accounting principles generally accepted in the United States of America ("U.S.") requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at
the date of the financial statements, and the reported amounts of expenses incurred during the reporting period. Significant items subject
to such estimates and assumptions include the estimates of the fair values of convertible preferred stock, earnout-related Common Stock,
and preferred stock warrant liability, stock-based compensation expense, the fair value of right-to-use assets and lease liabilities,
and the valuation allowance associated with deferred tax assets. Actual results could differ from those estimates.
Predecessor and the Company
define its critical accounting policies as those accounting principles that require it to make subjective estimates and judgments about
matters that are uncertain and are likely to have a material impact on its financial condition and results of operations, as well as the
specific manner in which it applies those principles. While significant accounting policies are more fully described in Note 2 to the
Company's unaudited financial statements appearing elsewhere in this prospectus, the Company believes the following are the critical
accounting policies used in the preparation of its financial statements that require significant estimates and judgments.
Fair value measurements
- Fair value is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants on the measurement date. In determining fair value, the assumptions that market participants would use in pricing an asset
or liability (the inputs) are based on a tiered fair value hierarchy consisting of three levels, as follows:
Level 1
-
Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
Level 2
-
Inputs (other than quoted prices included in Level 1) that are either directly or indirectly observable for the asset or liability. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3
-
Unobservable inputs for which there is little or no market data and which require the Company to develop its own assumptions about how market participants would price the asset or liability. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
139
The categorization of a financial
instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The carrying amounts of cash,
restricted cash, and cash equivalents, prepaid expenses and other current assets, accounts payable, and accrued liabilities approximate
fair value due to their relatively short-term maturities.
Research and development
R&D costs consist primarily
of salaries and benefits, including stock-based compensation, occupancy, materials and supplies, contracted research, consulting arrangements,
and other expenses incurred in the pursuit of R&D programs. R&D costs are expensed as incurred.
Stock-based compensation
The Company periodically
issues Common Stock and stock options to officers, directors, and consultants for services rendered. The Company accounts for stock-based
compensation as measured at grant date, based on the fair value of the award. The Company uses a Black-Scholes option pricing model ("Black-Scholes")
to estimate option award fair value, which requires the input of subjective assumptions, including the expected volatility of Common Stock,
expected risk-free interest rate, and the option's expected life. The Company also evaluates the impact of modifications made to
the original terms of equity awards when they occur. The fair value of restricted stock awards is based upon the share price of the Common
Stock on the date of grant.
The fair value of equity
awards that are expected to vest is amortized on a straight-line basis over the requisite service period. Stock-based compensation expense
is recognized net of actual forfeitures when they occur, as an increase to additional paid-in capital in the condensed consolidated balance
sheets and in research and development or, general and administrative expenses in the condensed consolidated statements of operations
and comprehensive loss. All stock-based compensation costs are recorded in the condensed consolidated statements of operations based upon
the underlying employee's role within the Company.
Income taxes
The Company accounts for
income taxes under the liability method. Under this method, deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences
are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts
expected to be realized.
The Company follows tax accounting
requirements for the recognition, measurement, presentation, and disclosure in the financial statements of any uncertain tax positions
that have been taken or expected to be taken on a tax return. No liability related to uncertain tax positions is recorded in the financial
statements. It is the Company's policy to include penalties and interest expense related to income taxes as a component of income
tax expense, as necessary. The Company has not recorded any interest or penalties associated with income tax since inception. Tax years
subsequent to 2020 are subject to examination by federal and state authorities.
Recent Accounting Pronouncements
The Company has concluded
that there are no recent accounting pronouncements expected to have a material impact on the Company's financial statements.
Qualitative and Quantitative Disclosures About Market Risk
The Company's primary
exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly
because of the Company's investments, including cash equivalents, which may be in the form of a money market fund.
In the future, the Company
may contract with vendors invoicing in a foreign denominated currency. As a result, the Company may be subject to fluctuations in foreign
currency rates in connection with certain of these agreements. Transactions denominated in currencies other than the United States dollar
will be recorded based on exchange rates at the time such transactions arise. As of September 30, 2024, all transactions have been denominated
in U.S. dollars.
140
Inflation will generally
affect the Company by increasing the cost of labor and costs associated with preclinical and clinical trials and future manufacturing
and commercialization activities as well as general corporate costs. The Company does not believe that inflation had a material effect
on the Company's business, financial condition or results of operations for the period ended September 30, 2024, but increased inflation
may materially impact the Company in later periods of 2024 and beyond.
Emerging Growth Company and Smaller Reporting Company Status
In April 2012, the Jumpstart
Our Business Startups Act of 2012 (the "JOBS Act") was enacted. Section 107 of the JOBS Act provides that an
"emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the
Securities Act of 1933, as amended, for complying with new or revised accounting standards. Thus, an emerging growth company can delay
the adoption of certain accounting standards until those standards would otherwise apply to private companies. PBAX previously elected
the extended transition period for complying with new or revised accounting standards, which delays the adoption of these accounting standards
until they would be applicable to private companies. The Company expects to continue to take advantage of the benefits of the extended
transition period.
In addition, as an emerging
growth company, the Company may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally
to public companies. These provisions include:
●
being permitted to present only two years of audited financial statements in addition to any required unaudited interim financial statements, with correspondingly reduced disclosure in the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations";
●
an exception from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended;
●
reduced disclosure about the Company's executive compensation arrangements in its periodic reports, proxy statements and registration statements;
●
exemptions from the requirements of holding non-binding advisory votes on executive compensation or golden parachute arrangements; and
●
an exemption from compliance with the requirements of the Public Company Accounting Oversight Board regarding the communication of critical audit matters in the auditor's report on financial statements.
The Company will cease to
qualify as an emerging growth company on the date that is the earliest of: (i) the last day of the fiscal year following the fifth
anniversary of the date of the first sale of shares of PBAX Class A Common Stock in its initial public offering, (ii) the last day
of the fiscal year in which the Company has more than $1.07 billion in total annual gross revenues, (iii) the date on which
the Company is deemed to be a "large accelerated filer" under the rules of the SEC, which means the market value of the Common
Stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th, or (iv) the date on which the Company
has issued more than $1.0 billion of non-convertible debt over the prior three-year period. The Company may choose to take advantage
of some but not all of these reduced reporting burdens. Accordingly, the information contained herein may be different than you might obtain from other public companies.
141
MANAGEMENT OF CERO
Executive Officers and Directors
As of December 2, 2024, our directors and executive
officers were as follows:
Name
Age
Title
Executive Officers:
Chris Ehrlich
54
Chairman and Chief Executive Officer
Andrew "Al" Kucharchuk
44
Chief Financial Officer
Kristen Pierce
54
Chief Development Officer
Directors:
Brian G. Atwood
72
Director
Michael Byrnes
48
Director
Kathleen LaPorte
63
Director
Lindsey Rolfe, M.D.
56
Director
Shami Patel
55
Director
Executive Officers
Chris Ehrlich
has
served as our Chairman and Chief Executive Officer since December 2024. From October 2024 to November 2024, he served as the interim Chairman
and Chief Executive Officer. Prior to this, he served as the Vice Chairman of our board of directors from February 2024 to October 2024.
He previously served as the Chief Executive Officer of PBAX from October 2021 until the Closing of the Business Combination in February
2024. From January 2021 to August 2021, he served as the Chief Executive Officer of Locust Walk Acquisition Corp (Nasdaq: LWAC) until
it merged with eFFECTOR Therapeutics, Inc. He is also the Principal of Ehrlich Bioventures, LLC, a consultancy working with emerging biopharma
companies. He previously served as Senior Managing Director and the Global Head of Strategic Transactions at Locust Walk Partners from
2013 to 2021. He brings significant biotechnology industry, business development, venture capital experience, investment banking and SPAC
experience. While at Locust Walk Partners, Mr. Ehrlich was involved with sourcing and leading multiple transactions for emerging
biopharmaceutical companies, including the sale of Xyphos Biosciences, Inc. to Astellas in 2019 and the sale of Thar Pharmaceuticals to
Grunenthal in 2018. Prior to Locust Walk Partners, he was a Managing Director at InterWest Partners ("InterWest"), a
venture capital firm. At InterWest, he served on the boards of KAI Pharmaceuticals, a privately held pharmaceutical company (acquired
by Amgen in 2012), Biomimetic Therapeutics, Inc., a biotechnology company (acquired by Wright Medical Technologies in 2013), Invuity,
Inc., a medical technology company acquired by Stryker in 2018) and Xenon Pharmaceuticals, a biopharmaceutical company (Nasdaq: XENE).
Prior to joining InterWest, Mr. Ehrlich worked as the Director of Licensing and Business Development at Purdue Pharma, in business
development at Genentech, in venture capital at the U.S. Russia Investment Fund, and in biotechnology strategy development at L.E.K. Consulting.
Mr. Ehrlich also currently serves on the board of directors of Prostate Management Diagnostics, Inc., on the advisory board of the
Peter Michael Foundation, where he is a Senior Advisor, and on the healthcare at Kellogg advisory board at Northwestern University. Mr. Ehrlich
has a B.A. in Government from Dartmouth College and an M.B.A. from the Kellogg Graduate School of Management at Northwestern University,
where he is a frequent lecturer.
Mr. Ehrlich was selected
to serve on our board of directors based on his substantial investment and acquisition experience in the biotechnology and biopharmaceutical
industries and his experience serving as a director for various public and private companies.
Andrew "Al"
Kucharchuk
has served as the Chief Financial Officer since October 2024, Chief Financial Officer of Nukkleus Inc. (NUKK) since June
2024 and as Chief Financial Officer of Chain Bridge I (NASDAQ: CBRGU) since April 2024. Previously, Mr. Kucharchuk was the Chief Financial
Officer of Theralink Technologies, Inc. (OTC: THER) from May 2023 to June 2024. Prior to his role at Theralink, Mr. Kucharchuk was the
Chief Financial Officer of Adhera Therapeutics, Inc (OTC: ATRX) from September 2022 to August 2023. Prior to that role, Mr. Kucharchuk
held various positions at OncBioMune Pharmaceuticals, Inc. including Chief Executive Officer, Chief Operating Officer and Chief Financial
Officer from November 2006 to July 2020 and has served as a member of the board of directors since June 2020. Mr. Kucharchuk holds a B.A.
in Business and an MBA in Finance from Tulane University.
142
Kristen Pierce
has
served as the Chief Development Officer since October 2024. Dr. Pierce has over 20 years of oncology experience, leading nonclinical and
early clinical stage projects. Prior to joining CERo, Dr. Pierce was Vice President, Translational Medicine at Pionyr Immunotherapeutics
from September 2021 to June 2023. Prior to that, she served as Executive Director, Asset Team Leader at Pfizer Inc. (NYSE: PFE) where
she led the late nonclinical and early clinical development of several antibody and small molecules in oncology. Dr. Pierce received her
Ph.D. from the University of Arizona in Pharmacology and Toxicology and spent four years as a postdoc at Duke University in the laboratory
of the Nobel Prize winning scientist, Dr. Robert J. Lefkowitz. Dr. Pierce received her B.A. from Bates College.
Directors
Brian G. Atwood
previously
served as Chairman and Chief Executive Officer of CERo from February 2024 to September 2024, and previously served as Chairman of PBAX
from October 2021 the Closing of the Business Combination in February 2024. Mr. Atwood serves as a Managing Director for Versant
Ventures, a healthcare-focused venture capital firm that he co-founded in 1999. In 2015, Mr. Atwood co-founded Cell Design Labs, Inc.,
a biotechnology company focused on developing human cell engineering technology for the treatment of multiple diseases, including cancer,
where he served as President and Chief Executive Officer until 2017, when it was acquired by Gilead Sciences. Mr. Atwood serves
on the board of directors of Clovis Oncology, Inc. (Nasdaq: CLVS), and Atreca, Inc. (Nasdaq: BCEL), where he is Chairman. He also
served on the board of directors of Immune Design Corp. from May 2008 until June 2016 (acquired by Merck in 2019), Veracyte, Inc.,
from its founding in 2008 until December 2016, OpGen Inc., from July 2007 until December 2017, Five Prime Therapeutics, from 2002
until March 2016, Cadence Pharmaceuticals, Inc. from March 2006 until its acquisition in March 2014, Helicos Biosciences from 2003
until September 2011, Pharmion Corporation from 2000 until its acquisition in March 2008, Trius Therapeutics, Inc. from February
2007 until its acquisition in September 2013 and Locust Walk Acquisition Corp. (Nasdaq: LWAC) from January 2021 until the consummation
of its business combination in August 2021. Mr. Atwood holds a B.S. in Biological Sciences from the University of California, Irvine,
a M.S. in Ecology from the University of California, Davis, and a M.B.A. from Harvard Business School.
Mr. Atwood was selected to
serve on our board of directors because of his experience in the biotechnology industry, his years of business and leadership experience
and his financial sophistication and expertise.
Michael Byrnes
has
served as a member of our board of directors since February 2024. Mr. Byrnes has served as the Chief Financial Officer of eFFECTOR Therapeutics
since December 2020. Previously, Mr. Byrnes was Senior Vice President of Finance at Principia Biopharma, Inc. from January 2020 until
its acquisition by Sanofi in September 2020. Prior to that, Mr. Byrnes served as the Chief Financial Officer of Alkahest, Inc. from May
2018 to January 2020 and Chief Financial Officer of Ocera Therapeutics, Inc., from December 2014 until its acquisition by Mallinckrodt
Pharmaceuticals in December 2017. Mr. Byrnes served as Corporate Controller of Maxygen, Inc. from March 2010 to December 2014 and prior
to that, held finance positions of increasing responsibility from 2000 to 2010 with NeurogesX, Inc., Lipid Sciences, Inc. and ADAC Laboratories,
Inc., a Philips Medical Systems company. Mr. Byrnes received his B.S.C. in Finance from Santa Clara University and an M.B.A. from California
State University, Hayward.
Mr. Byrnes was selected to
serve on our board of directors based on his substantial leadership and management experience in the biopharmaceutical industry.
Kathleen LaPorte
has
served as a member of our board of directors since February 2024, and previously served a member of PBAX's board of directors from
October 2021 until the Closing of the Business Combination in February 2024. Ms. LaPorte is an experienced executive, founder and board
member, focused on life sciences. She co-founded New Leaf Ventures, served as a General Partner of The Sprout Group, and was Chief Business
Officer and Chief Executive Officer of Nodality Inc. Ms. LaPorte has served on sixteen public company boards and fourteen public company
audit committees and numerous private company boards. Ms. Laporte currently serves as an independent director for Bolt Biotherapeutics
(Nasdaq: BOLT), Precipio Diagnostics (Nasdaq: PRPO), 89Bio (Nasdaq: ENTB), Elysium Therapeutics, and Q32 Bio Inc. (Nasdaq: QTTB). Ms.
LaPorte serves as the chair of the audit committees of Bolt Biotherapeutics, Precipio Diagnostics and Q32 Bio and as the chair of the
compensation committee of 89Bio. She previously served on the California Institute for Regenerative Medicine, a state agency board. Ms.
LaPorte has a B.S. degree in Biology from Yale University and a M.B.A. from the Stanford University Graduate School of Business.
143
Ms. LaPorte was selected
to serve on our board of directors based on her extensive leadership and management experience in the life sciences industry.
Lindsey Rolfe, M.D.
,
has served as a member of our board of directors since February 2024. Dr Rolfe has served as Chief Medical Officer at 3B Pharmaceuticals
GmbH since August 2023 and previously served as Chief Medical Officer at Clovis Oncology Inc. from August 2015 to June 2023, and served
as Senior Vice President of Clinical Development from 2010. At Clovis, Dr. Rolfe oversaw the development team that obtained approvals
for Rubraca as an ovarian cancer treatment in the United States and Europe, and was responsible for all pre- and post-marketing medical
activities. Dr. Rolfe has more than 20 years of drug development experience and previously served in senior oncology development
roles at Celgene Corporation, Pharmion Corporation, Cambridge Antibody Technology, UCB Inc. and Celltech Group plc. In addition, Ms. Rolfe
has served as an independent director at Atreca Inc. (Nasdaq: BCEL) since August 2019. Dr. Rolfe holds a BSc Anatomy and Bachelor
of Medicine and Surgery from the University of Edinburgh, undertook post-graduate medical training in London, UK and obtained her post-graduate
internal medicine qualification as a Member of the Royal College of Physicians. She has specialist accreditation in Pharmaceutical Medicine
from the UK General Medical Council and is a Fellow of the Faculty of Pharmaceutical Medicine in the UK.
Dr. Rolfe was selected
to serve on our board of directors based on her experience in leading drug discovery and development of therapeutics.
Shami Patel
has served
as a member of our board of directors since October 2024. Mr. Patel is a Managing Director at Launchpad Capital and has over 25 years
of global experience in financial services and capital markets as an executive, board member and investor. Mr. Patel is also an advisor
to Launch One Acquisition Corp. (Nasdaq: LPAA), a blank check company which raised $230.0 million in its initial public offering in July
2024 and is currently searching for a business combination target in the healthcare or healthcare related industries and, in particular,
life sciences. He was formerly a Managing Director at Cohen Circle from January 2015 to August 2024. His SPAC experience includes being
the Chief Operating Officer of FTAC Olympus Acquisition Corp. from July 2020 to August 2020, which merged with Payoneer Inc. (NASDAQ:
PAYO) in June 2021, as an advisor to Phoenix Biotech Acquisition Corp., which merged with CERo Therapeutics Holdings, Inc. (NASDAQ: CERO)
in February 2024, as an advisor to Newcourt Acquisition Corp. which merged with Psyence Biomedical Ltd. (NASDAQ: PBM) in January 2024,
and as an advisor to LWAC, which merged with eFFECTOR Therapeutics, Inc. (NASDAQ: EFTR) in August 2021. Mr. Patel was also active in origination,
due diligence and execution of SPACs as a member of the Board of FinTech Acquisition Corp. which merged with CardConnect LLC (NASDAQ:
CCN) in August 2016 and FinTech Acquisition Corp. II which merged with Intermex Holdings II, Inc. in July 2018, and the merged company
was renamed International Money Express, Inc. (NASDAQ: IMXI); Mr. Patel served as a board observer of IMXI following its business combination,
until March 2020. He also served as an advisor to FinTech Acquisition Corp. III which merged with Paya Holdings Inc. (NASDAQ: PAYA) in
October 2020 and FinTech Acquisition Corp. IV which merged with Perella Weinberg Partners (NASDAQ: PWP) in June 2021. Aside from his experience
with special purpose acquisition companies, from 2010 to 2015 Mr. Patel served as the Vice Chairman of the board of directors and Chair
of the compliance committee of Golden Pacific Bancorp, Inc., which was acquired by SoFi Technologies (NASDAQ: SOFI). From 2012 to 2014,
he served at Clean Pacific Ventures Management, LLC, a venture capital firm specializing in early stage investments, as a venture partner.
Mr. Patel was a partner at, and served on the executive committee of, Hexagon Securities, LLC, a credit focused investment bank and securities
firm from 2010 to 2012. From 2001 to August 2009, he served as Managing Director and Senior Partner at Cohen & Company, where he helped
launch Alesco Financial, Inc. (NYSE: AFN), where he served as Chief Operating Officer and Chief Investment Officer from 2006 to 2009.
From 1999 to 2000, he served as Chief Financial Officer for TRM Corporation (NASDAQ: TRMM), a consumer and financial services company.
In 2000, Mr. Patel co-founded iATMglobal.net, a middleware software business where he served as Chief Executive Officer and which was
sold to NCR Corporation in 2001. He served as Vice President of the West Coast Region for Sirrom Capital Corporation, a mezzanine finance
fund, from 1998 to 1999. Prior to this he was in the business services group at Robertson Stephens, an investment banking firm, from 1997
to 1998 and served as a strategy consultant in the energy group at Andersen Consulting (now known as Accenture plc) from 1991 to 1993.
Mr. Patel served on the Board of Visitors of Duke University School of Law from 2011 to 2023 where he was a Senior Lecturing Fellow. Mr.
Patel received a Juris Doctor with honors and Master of Business Administration from Duke University and Bachelor of Arts in Philosophy
and Economics from Trinity University.
144
Mr. Patel was selected to
serve on our board of directors based on his extensive investment, leadership and operational experience.
Family Relationships
There are no family relationships
between our board of directors and any of our executive officers.
Board of Directors
Director Independence
Nasdaq listing rules require
that a majority of the board of directors of a company listed on Nasdaq be composed of "independent directors," which is defined
generally as a person other than an officer or employee of a company or its subsidiaries or any other individual having a relationship,
which, in the opinion of such company's board of directors, would interfere with the director's exercise of independent judgment
in carrying out the responsibilities of a director. Based on business and personal information provided by each director concerning her
or his background, employment, and affiliations, including family relationships, our board of directors has determined that each of Mr.
Byrnes, Ms. LaPorte, Dr. Rolfe and Mr. Patel is an independent director under the Nasdaq listing rules and Rule 10A-3 of the Exchange
Act. In addition, we determined that each of Brian G. Atwood, Barbara A. Kosacz and Caroline M. Loewy, who served on the board
of directors during fiscal year 2023, and Ms. Rapaport, who served on the board of directors during fiscal year 2024 until September 2024,
was also an independent director under the Nasdaq listing rules and Rule 10A-3 of the Exchange Act. In connection with Mr. Atwood's
appointment as our Chief Executive Officer in February 2024, Mr. Atwood ceased to be independent, and in connection with Mr. Ehrlich's
appointment as our Interim Chairman and Chief Executive Officer on September 30, 2024, Mr. Ehrlich ceased to be independent. Mr. Erhlich
was determined by the board of directors to be independent from the closing of the Business Combination until his appointment as our Interim
Chairman and Chief Executive Officer.
In addition, the rules of
Nasdaq require that, subject to specified exceptions, each member of a listed company's audit, compensation and nominating and corporate
governance committees be independent. Under the rules of Nasdaq, a director will only qualify as an "independent director"
if, in the opinion of that company's board of directors, that person does not have a relationship that would interfere with the
exercise of independent judgment in carrying out the responsibilities of a director. In making these determinations, our board of
directors considered the current and prior relationships that each non-employee director has with us and all other facts and circumstances
our board of directors deemed relevant in determining independence, including the beneficial ownership of our Common Stock by each non-employee
director and relationships with each of PBAX and Legacy CERo.
Classified Board of Directors
In accordance with the terms
of our Charter, our board of directors is divided into three classes with staggered, three-year terms. At each annual meeting of stockholders,
the directors whose terms then expire will be eligible for reelection until the third annual meeting following reelection. Our directors
are divided among the three classes as follows:
●
the Class I directors are Mr. Byrnes and Ms. Rolfe, and their terms will expire at our 2025 annual meeting of stockholders;
●
the Class II directors are Mr. Atwood and Ms. LaPorte, and their terms will expire at our 2026 annual meeting of stockholders; and
●
the Class III directors are Mr. Ehrlich and Mr. Patel, and their terms will expire at our 2027 annual meeting of stockholders.
145
Our Bylaws provide that the
number of members of our board of directors shall be fixed in accordance with our Charter. Our Charter provides that the authorized number
of directors may be changed only by resolution of the board of directors. Any additional directorships resulting from an increase in the
number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of
the directors. Our board of directors is currently fixed at seven members. The division of our board of directors into three classes with
staggered three-year terms may delay or prevent a change of our board of directors or a change in control of our company. Our directors
may be removed only for cause by the affirmative vote of the holders of at least two-thirds of our outstanding voting stock then entitled
to vote in an election of directors.
Director Attendance at Annual Meeting of
Stockholders
We encourage our directors
to attend our annual meetings of stockholders. We did not hold an annual meeting of stockholders during the fiscal year ended December
31, 2023.
Board and Committee Meetings
During the fiscal year ended
December 31, 2023, our board of directors met four times, our Audit Committee met four times, our Compensation Committee and our
nominating and corporate governance committee met zero times. Each board member attended 75% or more of the aggregate number of meetings
of the board of directors and meetings of the committees on which he or she served during the fiscal year ended December 31, 2023,
for which he or she was a director or committee member.
Board Leadership Structure
Our board of directors does
not have a policy regarding separation of the roles of Chief Executive Officer and chairman of the board of directors. Our board of directors
recognizes that it is important to determine an optimal board leadership structure to ensure the independent oversight of management as
we continue to grow, and believes it is in our best interests to make determinations regarding such leadership structure based on circumstances
from time to time. Currently, our Chief Executive Officer serves as the chairman of the board of directors.
Our board of directors believe
that this leadership structure, combined with our corporate governance policies and processes, creates an appropriate balance between
strong and consistent leadership and independent oversight of our business. The chairman chairs the meetings of our board of directors
and stockholders, with input from the independent directors, and as such, our board of directors believes that a person with comprehensive
knowledge of our company is in the best position to serve such role. In making this determination, the board of directors considered,
among other matters, Mr. Ehrlich's management of our business on a day-to-day basis coupled with his direct involvement in our business
operations, and believed that Mr. Ehrlich is highly qualified to act as both chairman and Chief Executive Officer due to his experience,
knowledge and history with both Legacy CERo and PBAX.
In addition, each of our
other directors is "independent" under Nasdaq standards. Our independent vice chairman presides over regularly-held executive
sessions of independent directors, without management present, and all of our independent directors are active in the oversight of our
company. In addition, our board of directors and each committee of board of directors has complete and open access to any member of management
and the authority to retain independent legal, financial and other advisors as they deem appropriate.
Our board of directors believe
its administration of its risk oversight function has not affected its leadership structure. Risk is inherent with every business, and
how well a business manages risk can ultimately determine its success. Our board of directors is actively involved in oversight of risks
that could affect us. This oversight is conducted primarily by our full board of directors, which has responsibility for general oversight
of risks, and the Audit Committee, which has responsibility for reviewing the adequacy of our risk management activities with management
and our independent registered public accounting firm.
At each of its meetings,
the board of directors receives business updates from various members of management. These updates may identify matters that have emerged
within that member of management's scope of responsibility that involve operational, financial, legal or regulatory risks and, in
these cases, the board of directors provides guidance to management. Our board of directors believes that full and open communication
between management and the board of directors is essential for effective risk management and oversight.
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Our board of directors has
concluded that our current leadership structure is appropriate at this time. However, our board of directors will continue to periodically
review our leadership structure and may make such changes in the future as it deems appropriate.
Role of Board in Risk Oversight
Our board of directors has
responsibility for the oversight of our risk management processes and, either as a whole or through its committees, regularly discusses
with management our major risk exposures, their potential impact on our business and the steps we take to manage them. The risk oversight
process includes receiving regular reports from board committees and members of senior management to enable our board of directors to
understand our risk identification, risk management and risk mitigation strategies with respect to areas of potential material risk, including
operations, finance, legal, regulatory, strategic and reputational risk.
The Audit Committee reviews
information regarding liquidity and operations, and oversees our management of financial risks. It also reviews information and policies
related to information technology risk, including cyber-security and incident response planning. Periodically, the Audit Committee reviews
our policies with respect to risk assessment, risk management, loss prevention and regulatory compliance. Oversight by the Audit Committee
includes direct communication with our external auditors, and discussions with management regarding significant risk exposures and the
actions management has taken to limit, monitor or control such exposures. The Compensation Committee is responsible for assessing whether
any of our compensation policies or programs has the potential to encourage excessive risk-taking. The nominating and corporate governance
committee manages risks associated with the independence of the board of directors, corporate disclosure practices and potential conflicts
of interest. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, the entire
board of directors is regularly informed through committee reports about such risks. Matters of significant strategic risk are considered
by our board of directors as a whole.
Committees of the Board of Directors
The standing committees of
our board of directors include the Audit Committee, a Compensation Committee, and a nominating and corporate governance committee, each
of which operates under a charter that has been approved by our board of directors. Such charters are available on our website at
www.cero.bio/investors
.
The reference to our website address does not constitute incorporation by reference of the information contained at or available through
our website. We have included our website address as an inactive textual reference only.
Audit Committee
The members of our Audit
Committee are Mr. Byrnes, Dr. Rolfe and Mr. Patel. Mr. Byrnes serves as the chairperson of the Audit Committee. All members of our Audit
Committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and Nasdaq. Our board of
directors has determined that Mr. Byrnes is an "audit committee financial expert" as defined by applicable SEC rules and has
the requisite financial sophistication as defined under the applicable Nasdaq listing standards. Our board of directors has determined
each of Mr. Byrnes, Dr. Rolfe and Mr. Patel is independent under the applicable rules of the SEC and Nasdaq and has the requisite financial
expertise required under the applicable requirements of Nasdaq. In arriving at this determination, our board of directors has examined
each Audit Committee member's scope of experience and the nature of their experience reading and understanding financial statements.
The Audit Committee's
main function is to oversee our accounting and financial reporting processes and the audits of our consolidated financial statements.
The Audit Committee's responsibilities include, among other things:
●
selecting a qualified firm to serve as the independent registered public accounting firm to audit our financial statements;
●
helping to ensure the independence and performance of the independent registered public accounting firm;
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●
discussing the scope and results of the audit with the independent registered public accounting firm, and reviewing, with management and the independent accountants, our annual audited financial statements and quarterly financial statements;
●
developing procedures for employees to submit concerns anonymously about questionable accounting or audit matters;
●
reviewing and discussing policies on risk assessment and risk management;
●
reviewing related party transactions;
●
obtaining and reviewing a report by the independent registered public accounting firm at least annually that describes the internal quality-control procedures, any material issues with such procedures, and any steps taken to deal with such issues when required by applicable law; and
●
approving (or, as permitted, pre-approving) all audit and all permissible non-audit service to be performed by the independent registered public accounting firm.
Compensation Committee
The members of our Compensation
Committee are Ms. LaPorte, Dr. Rolfe and Mr. Patel. Ms. LaPorte serves as the chairperson of the Compensation Committee. Our board of
directors has determined that each of Ms. LaPorte, Dr. Rolfe and Mr. Patel is independent under the applicable Nasdaq listing standards
and is a "non-employee director" as defined in Rule 16b-3 promulgated under the Exchange Act.
Our Compensation Committee's
main function is to oversee our compensation structure, policies and programs and to review the processes and procedures for the consideration
and determination of director and executive compensation. The Compensation Committee's responsibilities include, among other things:
●
recommending to the board of directors goals and objectives, non-equity compensation, and equity grants of all senior officers;
●
recommending to the board of directors goals and objectives, non-equity compensation, and equity grants for the Chief Executive Officer;
●
recommending to the board of directors non-equity compensation and equity grants for the directors;
●
reviewing and discussing with the board of directors corporate succession plans for the Chief Executive Officer and key officers;
●
reviewing and discussing with management its talent development and related initiatives;
●
assisting the board of directors with its oversight of our strategies, programs, and initiatives related to employee health, safety, and well-being, engagement, pay equity, and diversity and inclusion;
●
selecting independent compensation consultants and assessing whether there are any conflicts of interest with any of the Compensation Committee's compensation advisors;
●
reviewing and recommending to the board of directors employment agreements, severance arrangements and change-of-control agreements or provisions for executive officers and other senior management, as appropriate; and
●
reviewing the policies relating to compensation and benefits of employees.
Nominating and Corporate Governance Committee
The members of our nominating
and corporate governance committee are Dr. Rolfe, Ms. LaPorte and Mr. Byrnes. Dr. Rolfe serves as the chairperson of the committee. Our
board of directors has determined that each of Dr. Rolfe, Ms. LaPorte and Mr. Byrnes is independent under the applicable Nasdaq listing
standards.
148
The nominating and corporate
governance committee's main function is to consider candidates for board membership and oversee our corporate governance policies,
reporting and making recommendations to our board of directors concerning governance matters and oversight of the evaluation of our board
of directors. The nominating and corporate governance committee's responsibilities include, among other things:
●
recommending to the board of directors for its approval criteria for board of directors and committee membership;
●
establishing a process for identifying and evaluating board of director candidates, including nominees recommended by stockholders;
●
identifying individuals qualified to become members of the board of directors;
●
recommending to the board of directors the persons to be nominated for election as directors and to each of the committees of the board of directors;
●
developing and recommending to the board of directors corporate governance guidelines and periodically reviewing those guidelines and the code of conduct and business ethics and recommending any changes; and
●
overseeing a periodic evaluation of the board of directors and its committees.
Director Nomination Process
Our board of directors is
responsible for filling vacancies on our board of directors and for nominating candidates for election by our stockholders each year in
the class of directors whose term expires at the relevant annual meeting. The board of directors delegates the selection and nomination
process to the nominating and corporate governance committee, with the expectation that other members of the board of directors, and of
management, will be requested to take part in the process as appropriate.
The nominating and corporate
governance committee considers candidates for board of director membership suggested by its members and our Chief Executive Officer. Additionally,
in selecting nominees for directors, the nominating and corporate governance committee will review candidates recommended by stockholders
in the same manner and using the same general criteria as candidates recruited by the committee and/or recommended by our board of directors.
The nominating and corporate governance committee may gather information about the candidates through interviews, detailed questionnaires,
comprehensive background checks or any other means that the nominating and corporate governance committee deems to be appropriate in the
evaluation process.
Our nominating and corporate
governance committee and our board of directors consider a broad range of factors relating to the qualifications of nominees. Our nominating
and corporate governance committee's and our board of directors' priority in selecting board members is the identification
of persons who will provide a composite mix of backgrounds, experience, knowledge and capabilities that will allow our board of directors
to promote our strategic objectives and fulfill its responsibilities to our stockholders. Our nominating and corporate governance committee
and our board of directors highly value diversity and, as such, also consider diversity of gender, race, ethnicity, age, gender identity,
gender expression and sexual orientation when selecting members of our board of directors.
Any stockholder who wishes
to recommend a candidate for consideration by the committee as a nominee for director should follow the procedures described in our proxy
statement to be filed with the SEC in connection with our 2024 special meeting of stockholders within 120 days after the end of the fiscal
year ended December 31, 2023. The nominating and corporate governance committee will also consider whether to nominate any person proposed
by a stockholder in accordance with the provisions of our Bylaws relating to stockholder nominations.
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Compensation Committee Interlocks and Insider Participation
During the fiscal year ended
December 31, 2023, Mr. Ehrlich served as the Chief Executive Officer of our predecessor, PBAX. In connection with the Business Combination,
on February 14, 2024, Mr. Ehrlich ceased to be an officer of PBAX. Mr. Ehrlich served as a member of our Compensation Committee from the
closing of the Business Combination until his appointment as our interim Chairman and Chief Executive Officer. Other than Mr. Ehrlich,
during the fiscal year ended December 31, 2023, none of the members of our Compensation Committee has ever been one of our officers or
employees. None of our executive officers currently serves, or has served, as a member of our board of directors or Compensation Committee
of any entity that has one or more executive officers serving as a member of our board of directors or Compensation Committee.
Board Diversity
Board diversity and inclusion
is critical to our success. While we do not have a formal policy on board of directors diversity, the board of directors is committed
to building a board of directors that consists of the optimal mix of skills, expertise, and diversity capable of effectively overseeing
the execution of our business and meeting our evolving needs, with diversity reflecting gender, age, race, ethnicity, background, professional
experience and perspectives. Our nominating and corporate governance committee considers the value of diversity on the board of directors
in evaluating director nominees. Accordingly, the nominating and corporate governance committee's evaluation of director nominees
includes consideration of their ability to contribute to the diversity of personal and professional experiences, opinions, perspectives
and backgrounds on the board of directors.
The matrix below provides
certain highlights of the composition of our board of directors based on self-identification. Each term used above and in the matrix below
has the meaning given to it in Nasdaq Listing Rule 5605(f).
Board Diversity Matrix (As of December 2, 2024)
Total Number of Directors:
6
Female
Male
Non-
Binary
Did Not Disclose Gender
Part I: Gender Identity
Directors
2
4
Part II: Demographic Background
African American or Black
Alaskan Native or Native American
Asian
1
Hispanic or Latinx
Native Hawaiian or Pacific Islander
White
2
3
Two or More Races or Ethnicities
LGBTQ+
Did Not Disclose Demographic Background
Communication with Directors
Any stockholder or interested
party may communicate with our board of directors, as a whole, or with individual directors on the board of directors, through an established
process for stockholder and other interested party communication. For a communication directed to the board of directors as a whole, stockholders
and other interested parties may submit a written communication by postal mail to the attention of the chairman of our board of directors
at the following address: CERo Therapeutics Holdings, Inc., 210 Haskins Way, Suite 230, South San Francisco, CA 94080.
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For a communication directed
to an individual director in his capacity as a member of the board of directors, stockholders and other interested parties may send such
communication to the attention of the individual director at the following address: CERo Therapeutics Holdings, Inc., c/o Corporate
Secretary, 210 Haskins Way, Suite 230, South San Francisco, CA 94080, Attention: Michael Byrnes.
We will forward by U.S. mail
any such communication to each director, and the chairman of the board of directors in his capacity as a representative of the board of
directors, to whom such communication is addressed to the address specified by each such director and the chair of the board of directors,
unless there are safety or security concerns that mitigate against further transmission. A copy of any such written communication may
also be forwarded to our general counsel and a copy of such communication may be retained for a reasonable period of time. You may submit
your concern anonymously or confidentially.
Communications may be forwarded
to other directors if they relate to important substantive matters and include suggestions or comments that may be important for other
directors to know. In general, communications relating to corporate governance and long-term corporate strategy are more likely to be
forwarded than communications relating to ordinary business affairs, personal grievances and matters as to which we tend to receive repetitive
or duplicative communications.
Code of Business Conduct and Ethics
We have adopted a written
code of business conduct and ethics that applies to our directors, officers, and employees, including our principal executive officer,
principal financial officer, principal accounting officer or controller, or persons performing similar functions. Our code of business
conduct and ethics is available under the Investors section of our website at
www.cero.bio/investors
. In addition, we intend to
post on our website all disclosures that are required by law or the listing standards of Nasdaq concerning any amendments to, or waivers
from, any provision of the code of business conduct and ethics. The reference to our website address does not constitute incorporation
by reference of the information contained at or available through our website. We have included our website address as an inactive textual
reference only.
Insider Trading Arrangements and Policies
During the three months ended
December 31, 2023, none of our directors or officers adopted, amended, or terminated a "Rule 10b5-1 trading arrangement" or
"non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.
Our board of directors has
adopted an insider trading policy which governs the purchase, sales, and/or other dispositions of our securities by directors, officers,
and employees. Our insider trading policy is attached hereto as Exhibit 19 and incorporated herein. In addition, we have adopted a Rule
10b5-1 trading plan policy, which permits our officers, directors, and certain other persons to enter into trading plans complying with
Rule 10b5-1 under the Exchange Act. Generally, under these trading plans, the individual relinquishes control over the transactions once
the trading plan is put into place and can only put such plans into place while the individual is not in possession of material non-public
information. Accordingly, sales under these plans may occur at any time, including possibly before, simultaneously with, or immediately
after significant events involving us.
Policy on Trading, Pledging and Hedging of Company Stock
Certain transactions in our
securities (such as purchases and sales of publicly traded put and call options, and short sales) create a heightened compliance risk
or could create the appearance of misalignment between management and stockholders. In addition, securities held in a margin account or
pledged as collateral may be sold without consent if the owner fails to meet a margin call or defaults on the loan, thus creating the
risk that a sale may occur at a time when an officer or director is aware of material, non-public information or otherwise is not permitted
to trade in our securities. Our insider trading policy expressly prohibits derivative transactions of our stock by our executive officers,
directors and employees. In addition, our insider trading policy also expressly prohibits purchases of any derivative securities that
provide the economic equivalent of ownership.
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EXECUTIVE COMPENSATION
Except as otherwise specified
in this Executive Compensation section, the information set forth herein relates to the executive compensation paid by Legacy CERo prior
to the Business Combination, and agreements with us, effective as of the Business Combination. PBAX did not pay any compensation to any
of its directors or executive officers at any time from its Initial Public Offering through the completion of the Business Combination.
This section discusses the material components of the executive compensation program for our named executive officers. Our only named
executive officer for the fiscal year ended December 31, 2023 was Dr. Corey, as Dr. Corey was the only executive officer during
the period presented.
2023 Summary Compensation Table
None of PBAX's executive
officers received any compensation for services rendered in 2023. The following table presents all of the compensation awarded to the
sole named executive officer of Legacy CERo during the years listed below.
Name and Principal Position
Year
Salary
($)
All Other Compensation ($)
(1)
Total
($)
Dr. Daniel Corey
2023
360,000
16,035
376,035
Former Chief Technology Officer and Former Chief Executive Officer
2022
360,000
12,685
372,685
(1)
The amounts reported in this column represent (i) $13,200 in Company contributions made under our 401(k) plan and (ii) $2,835 in Company-paid life insurance premiums during the fiscal year ended December 31, 2023 and, for the fiscal year ended December 31, 2022, (i) $9,400 in Company contributions made under our 401(k) plan and (ii) $3,285 in Company-paid life insurance premiums.
Narrative Disclosure to the 2023 Summary Compensation Table
Compensation of our named
executive officer for the fiscal year ended December 31, 2023 was determined and recommended by the compensation committee, and approved
by the board of directors. The compensation committee engaged a compensation consulting firm to provide and structure benchmarking data
for similar positions in similar companies.
2023 Base Salaries
The named executive officer's
base salary is a fixed component of annual compensation for performing specific duties and functions. Dr. Corey's base salary is
adjusted from time to time to realign with market levels after taking into account individual responsibilities, performance and experience.
For the fiscal year ended December 31, 2023, Dr. Corey's annual base salary was $360,000.
Perquisites
We generally do not provide
perquisites to our employees, other than certain de minimis perquisites available to all of our employees, including our named executive
officers.
401(k) Plan
We maintain the CERo Therapeutics
401(k) Plan, a tax-qualified retirement plan that provides eligible employees, including the named executive officer, with an opportunity
to save for retirement on a tax-advantaged basis. Plan participants are able to defer eligible compensation subject to applicable annual
limits under the Code. Participants' pre-tax or Roth contributions are allocated to each participant's individual account
and are then invested in selected investment alternatives according to the participants' directions. Participants are immediately
and fully vested in their contributions. We match each participant's contribution up to a safe harbor maximum of 4% of his or her
eligible compensation with participants vesting immediately and fully in such matching contributions. Our 401(k) plan is intended to be
qualified under Section 401(a) of the Code with the 401(k) plan's related trust intended to be tax exempt under Section 501(a) of
the Code.
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Health and Welfare Benefits
We provide benefits to our
named executive officer on the same basis as provided to all of its employees, including health, dental and vision insurance, as well
as life and disability insurance. Legacy CERo did not, and we will not, maintain any executive-specific benefit or perquisite programs.
Benefits were and are anticipated to be offered on the same basis as provided to all of our employees.
Outstanding Equity Awards as of December 31,
2023
There were no outstanding
equity incentive plan awards held by the named executive officer as of December 31, 2023.
Overview of Executive Compensation Program
Our Compensation Committee
anticipates annually reviewing the compensation of our employees, including our executive officers. In setting executive base salaries
and bonuses and granting equity incentive awards, the Compensation Committee considers compensation for comparable positions in the market,
the historical compensation levels of our executive officers, individual performance as compared to our expectations and objectives, internal
equity, our desire to motivate our employees to achieve short- and long-term results that are in the best interests of our stockholders,
and a long-term commitment to us. We intend to target a general competitive position and consider independent third-party benchmark analytics
to determine the mix of compensation of base salary, bonus and long-term incentives.
We engaged the services of
an external compensation consultant to advise on executive compensation matters including our overall compensation program design and
collection of market data to inform our compensation programs for our executive officers and members of our board of directors. The compensation
for our executive officers will have the following components: base salary, cash bonus opportunities, equity compensation, employee benefits,
and severance protections. Base salaries, employee benefits, and severance protections are designed to attract and retain senior management
talent. Annual cash bonuses and equity awards are used to promote performance-based pay that aligns the interests of the named executive
officers with the long-term interests of our stockholders and enhances executive retention.
Employment Arrangements
We are party to employment
agreements with each of our named executive officers. The arrangements generally provide for at-will employment without any specific term
and set forth the named executive officer's initial base salary, bonus potential, eligibility for employee benefits and severance
benefits upon a qualifying termination of employment, subject to such employee executing a separation agreement with us.
Employment Agreement with Mr. Atwood
On March 26, 2024, we entered
into an employment agreement with Mr. Atwood, our Chairman and Chief Executive Officer the ("Atwood Employment Agreement").
Pursuant to the Atwood Employment Agreement, Mr. Atwood is entitled to an initial annual base salary of $360,000, an initial target annual
incentive bonus of 50% of Mr. Atwood's base salary, an initial equity grant, and general eligibility to participate in our employee
benefit plans.
The Atwood Employment Agreement
provides that in the event Mr. Atwood's employment is terminated by us without "cause" (other than as a result of Mr.
Atwood's death or disability) or by Mr. Atwood with "good reason" (each as defined in the Atwood Employment Agreement),
in either case within thirty days before or within twelve months following a "change in control" (as defined in the Atwood
Employment Agreement) (the "Atwood Change in Control Period"), then, Mr. Atwood will be entitled to: (1) a lump sum cash payment
equal to three months of his then-current base salary, and (2) full acceleration of the vesting of all his outstanding equity awards.
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The Atwood Employment Agreement
provides that in the event Mr. Atwood's employment is terminated by us without "cause" (other than as a result of Mr.
Atwood's death or disability) or by Mr. Atwood for "good reason," in either case, outside of the Atwood Change in Control
Period, then, Mr. Atwood will be entitled to a lump sum cash payment equal to three months of his then-current base salary.
The Atwood Employment Agreement
provides that in the event Mr. Atwood's employment terminate as a result of Mr. Atwood's death or disability, then, Mr. Atwood
will be entitled to accelerated vesting of 50% of the then-unvested portion of outstanding equity awards.
Mr. Atwood's benefits
after termination (other than as a result of death or disability) are conditioned, among other things, on him timely signing and not revoking
a general release of claims in our favor.
The payments and benefits
under the Atwood Employment Agreement in connection with a change in control may not be eligible for federal income tax deduction by us
pursuant to Section 280G of the Code. These payments and benefits may also be subject to an excise tax under Section 4999 of the Code.
If the payments or benefits payable to Mr. Atwood in connection with a change in control would be subject to the excise tax imposed under
Section 4999 of the Code, then those payments or benefits will be reduced if such reduction would result in a higher net after-tax benefit
to him.
Mr. Atwood resigned from
his position as Chief Executive Officer, effective on September 30, 2024. In connection with such resignation, on September 30, 2024,
Mr. Atwood and the Company entered into a consulting agreement (the "Atwood Consulting Agreement"), effective October 1, 2024,
pursuant to which Mr. Atwood will provide consulting services for a period of 12 months following his resignation. Mr. Atwood will receive
a consulting fee of $25,000 per quarter. In connection with his entry into the Atwood Consulting Agreement, Mr. Atwood forfeited all 1,331,813
of his outstanding options, and received an award of 508,000 options to purchase shares of Common Stock, which will vest (i) 50% upon
the FDA's acceptance of the Company's IND and (ii) 50% upon the completion of a financing transaction generating at least
$1.5 million of gross proceeds, in each case subject to Mr. Atwood's continued service with the Company.
Employment Agreement with Mr. Carter
On March 26, 2024, we entered
into an employment agreement with Mr. Carter, our Chief Financial Officer and Corporate Secretary (the "Carter Employment Agreement").
Pursuant to the Carter Employment Agreement, Mr. Carter is entitled to an initial base salary of $350,000 and an initial target annual
incentive bonus of 35% of Mr. Carter's base salary, an initial equity grant, and general eligibility to participate in our employee
benefit plans.
The Carter Employment Agreement
provides that in the event Mr. Carter's employment is terminated by us without "cause" (other than as a result of Mr.
Carter's death or disability) or by Mr. Carter with "good reason" (each as defined in the Carter Employment Agreement),
in either case within thirty days before or within twelve months following a "change in control" (as defined in the Carter
Employment Agreement) (the "Carter Change in Control Period"), then, Mr. Carter will be entitled to: (1) continued payment
of his then-current base salary for a period of twelve months following his termination, (2) if Mr. Carter timely elects COBRA health
continuation, payment of COBRA premiums for continued health benefits for up to twelve months following his termination for him and his
eligible dependents who were covered under our health insurance plans on the date of such termination, (3) his annual target bonus
for the year of termination, and (4) full acceleration of the vesting of all his outstanding equity awards.
The Carter Employment Agreement
provides that in the event Mr. Carter's employment is terminated by us without "cause" (other than as a result of Mr.
Carter's death or disability) or by Mr. Carter for "good reason," in either case, outside of the Carter Change in Control
Period, then, Mr. Carter will be entitled to (1) continued payment of his then-current base salary for a period of nine months, and (2)
if Mr. Carter timely elects COBRA health continuation, payment of COBRA premiums for continued health benefits for up to nine months following
his termination for him and his eligible dependents who were covered under our health insurance plans on the date of such termination.
154
The Carter Employment Agreement
provides that in the event Mr. Carter's employment terminate as a result of Mr. Carter's death or disability, then, Mr. Carter
will be entitled to accelerated vesting of 50% of the then-unvested portion of outstanding equity awards.
Mr. Carter's benefits
after termination (other than as a result of death or disability) are conditioned, among other things, on him timely signing and not revoking
a general release of claims in our favor.
The payments and benefits
under the Carter Employment Agreement in connection with a change in control may not be eligible for federal income tax deduction by us
pursuant to Section 280G of the Code. These payments and benefits may also be subject to an excise tax under Section 4999 of the Code.
If the payments or benefits payable to Mr. Carter in connection with a change in control would be subject to the excise tax imposed under
Section 4999 of the Code, then those payments or benefits will be reduced if such reduction would result in a higher net after-tax benefit
to him.
Mr. Carter resigned from
his position as Chief Financial Officer, effective on September 30, 2024. In connection with such resignation, Mr. Carter forfeited all
495,397 of his outstanding options.
Offer Letter with Dr. Corey
On March 28, 2024, we entered
into an employment agreement with Dr. Corey, our Chief Technology Officer and Founder (the "Corey Offer Letter"). Pursuant
to the Corey Offer Letter, Dr. Corey is entitled to an initial annual base salary of 350,000, an initial target annual incentive bonus
of 50% of Dr. Corey's base salary, an initial equity grant, and general eligibility to participate in our employee benefit plans.
The Corey Offer Letter provides
that in the event Dr. Corey's employment is terminated by us without "cause" or by Dr. Corey for "good reason"
(each as defined in the Corey Offer Letter) within 90 days before or within twelve months following a "change in control"
(as defined in the Corey Offer Letter) (the "Corey Change in Control Period"), then Mr. Corey will be entitled to full acceleration
of the vesting of any options to purchase shares of our common stock that are subject to time-based vesting.
The Corey Offer Letter provides
that in the event Dr. Corey's employment is terminated by us without "cause" or by Dr. Corey for "good reason,"
Dr. Corey will be entitled to: (1) the continued payment of his then-current base salary for a period of up to six months following his
termination, and (2) if Dr. Corey timely elects COBRA health continuation, payment of COBRA premiums for continued health benefits for
up to six months following his termination.
Dr. Corey's benefits
after termination outside of the Corey Change in Control Period are conditioned, among other things, on him complying with his post-termination
obligations under his agreement, including a one-year non-solicitation obligation, and his timely signing a general release of claims
in our favor.
Dr. Corey resigned from his
position as Chief Technology Officer, effective September 23, 2024. In connection with such resignation, Dr. Corey forfeited 461,285 of
his outstanding options.
Consulting Agreement with Mr. Ehrlich
On September 30, 2024, we
entered into a consulting agreement with Chris Ehrlich (the "Ehrlich Consulting Agreement"), effective October 1, 2024. The
Ehrlich Consulting Agreement has an initial term of twelve months, commencing October 1, 2024, as may be extended by mutual written agreement.
Mr. Ehrlich will receive a consulting fee of $30,000 per month. In connection with his entry into the Ehrlich Consulting Agreement, Mr.
Ehrlich forfeited all 572,182 of his outstanding options, and received an award of 2,555,000 options to purchase shares of Common Stock,
which will vest (i) 50% upon the FDA's acceptance of the Company's IND and (ii) 50% upon the completion of a financing transaction
generating at least $1.5 million of gross proceeds, in each case subject to Mr. Ehrlich's continued service.
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Consulting Agreement with Mr. Kucharchuk
On September 30, 2024, we
entered into a consulting agreement with Andrew "Al" Kucharchuk (the "Kucharchuk Consulting Agreement"). The Kucharchuk
Consulting Agreement has an initial term of one year, commencing October 1, 2024, as may be extended by mutual written agreement. Mr.
Kucharchuk received a retainer of $15,000 upon his entry into the Kucharchuk Consulting Agreement, and will receive a monthly fee of $16,000
for his services during the term of the Kucharchuk Consulting Agreement. In addition, Mr. Kucharchuk received an award of 500,000 options
to purchase shares of Common Stock, which will vest in equal monthly installments over twelve months, subject to Mr. Kucharchuk's
continued service. Either party may terminate the Kucharchuk Consulting Agreement at any time with at least 30 days' prior written
notice.
Consulting Agreement with Dr. Pierce
On September 30, 2024, we
entered into a consulting agreement with Kristen Pierce (the "Pierce Consulting Agreement"), effective as of October 1, 2024.
The Pierce Consulting Agreement has an initial term of twelve months, commencing October 1, 2024, as may be extended by mutual written
agreement. Dr. Pierce will receive a monthly fee of $30,000 for her services during the term of the Pierce Consulting Agreement. In addition,
Dr. Pierce received an award of 200,000 options to purchase shares of Common Stock, which will vest in equal monthly installments over
twenty-four months, subject to Dr. Pierce's continued service; provided, that the vesting of 50% such options shall be accelerated
upon the FDA's acceptance of our IND. Either party may terminate the Pierce Consulting Agreement at any time with at least 30 days'
prior written notice.
Annual Bonuses
We use annual cash incentive
bonuses for the named executive officers to motivate their achievement of short-term performance goals and tie a portion of their cash
compensation to performance. It is expected that, near the beginning of each year, the Compensation Committee will select the performance
targets, target amounts, target award opportunities and other terms and conditions of annual cash bonuses for the named executive officers,
subject to the terms of their employment agreements. Following the end of each year, the Compensation Committee will determine the extent
to which the performance targets were achieved and the amount of the award that is payable to each of the named executive officers. A
bonus plan was established for executive officers in 2024.
Equity Incentive Compensation
We believe it is important
to maintain a strong link between executive incentives and the creation of stockholder value. We believe performance and equity-based
compensation for our executives to be an important component of maximizing stockholder value while, at the same time, attracting, motivating
and retaining high-quality executives. Upon consummation of the Business Combination, we assumed options issued pursuant to the CERo Therapeutics,
Inc. 2016 Equity Incentive Plan, as amended (the "2016 Plan"), and we currently maintain the CERo Therapeutics Holdings, Inc.
2024 Equity Incentive Plan (the "2024 Plan") and the CERo Therapeutics Holdings, Inc. 2024 Employee Stock Purchase Plan (the
"2024 ESPP").
As of December 31, 2023,
the 2016 Plan had options outstanding to purchase a total of 782,499 shares of common stock for a weighted average exercise price of $0.28
per share. On February 14, 2024, upon consummation of the Business Combination, these options were assumed by us and converted into options
to purchase shares in CERo at a conversion rate of 0.064452 underlying shares per legacy share and a strike price calculated as the legacy
strike price divided by 0.064452. This resulted in the issuance of options to purchase 50,433 shares of common stock at a weighted average
price of $4.36.
156
As of October 1, 2024, the
board of directors has approved option awards to the executive officers for 2024, as set forth below:
Name and Position
Stock
Options
Chris Ehrlich,
Chief Executive Officer and Chairman
(1)
2,555,000
Andrew "Al" Kucharchuk,
Chief Financial Officer
500,000
Kristen Pierce,
Chief Development Officer
265,898
Brian G. Atwood,
Former Chief Executive Officer and Chairman
(2)
508,000
Charles R. Carter,
Former Chief Financial Officer
(3)
-
Daniel Corey, M.D.,
Former Chief Technology Officer
(4)
395,386
(1)
Excludes 527,182 options granted under the 2024 Plan which were forfeited on September 30, 2024.
(2)
Excludes 1,331,813 options granted under the 2024 Plan which were forfeited on September 30, 2024.
(3)
Excludes 495,387 options granted under the 2024 Plan which were forfeited on September 30, 2024.
(4)
Excludes 461,285 options granted under the 2024 Plan which were forfeited on September 23, 2024.
Compensation Recovery Policy
Our board of directors adopted
a Compensation Recovery Policy (the "Compensation Recovery Policy"), in compliance with the Nasdaq listing rules, which requires
recovery from executive officers of incentive-based compensation that is earned, granted or vested based on the achievement of a financial
reporting measure in the event of a required accounting restatement of previously issued financial statements. The recoverable compensation
includes any compensation received after the effective date of the Compensation Recovery Policy and in the three-year fiscal period preceding
the date we were required to prepare the accounting restatement that is in excess of the amount that would have been earned, paid or vested
had it been calculated based on the restated financial statements. Recovery is required regardless of fault or a covered officer's
role in the financial reporting process. The Compensation Recovery Policy is filed as Exhibit 97.1 to our Annual Report on Form 10-K for
the year ended December 31, 2023.
Rule 10b5-1 Sales Plans
Our directors and executive
officers may adopt written plans, known as Rule 10b5-1 plans, in which they will contract with a broker to buy or sell shares of
common stock on a periodic basis. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the director
or executive officer when entering into the plan, without further direction from them. The director or executive officer may amend a Rule 10b5-1
plan in some circumstances and may terminate a plan at any time. Our directors and executive officers also may buy or sell additional
shares outside of a Rule 10b5-1 plan when they are not in possession of material nonpublic information, subject to compliance with
the terms of the insider trading policy.
157
DIRECTOR COMPENSATION
None of our directors received
compensation in 2023 for services rendered to PBAX or Legacy CERo, with the exception of Dr. Corey, who was compensated for his service
as our Chief Executive Officer. Dr. Corey is a named executive officer and his compensation is provided in the "
Summary Compensation
Table
" above.
On March 25, 2024, the board
of directors approved the compensation for non-employee directors for 2024. Each non-employee director other than the vice chairman will
receive $30,000 per annum, paid quarterly in advance. In addition, each non-employee director other than the vice chairman shall receive
an option award to purchase 112,500 shares of common stock. Such option awards vest quarterly over a three-year period and expire ten
years after the grant date. The vice chairman will receive $150,000 per annum, paid quarterly in advance. In addition, the vice chairman
shall receive an option award to purchase 527,182 shares of common stock. Such option awards vest quarterly over a three-year period and
expire ten years after the grant date.
On September 30, 2024, the
board of directors approved the grant of 255,000 options to each of our non-employee directors, which will vest (i) 50% upon the FDA's
acceptance of our IND and (ii) 50% upon the completion of a financing transaction generating at least $1.5 million of gross proceeds,
in each case subject to such director's continued service.
Mr. Atwood and Dr. Corey
have not received and will not receive additional compensation for their additional duties as directors in 2024. Mr. Atwood and Dr. Corey's
compensation is summarized above in "
Executive Compensation—Employment Agreements
."
158
PRINCIPAL STOCKHOLDERS
The following table sets
forth information regarding the beneficial ownership of our common stock as of December 16, 2024, by:
●
each person known by us to be the beneficial owner of more than 5% of our outstanding shares of Common Stock;
●
each of our named executive officers and directors that beneficially owns shares of our Common Stock; and
●
all our executive officers and directors as a group.
Beneficial ownership is determined
in accordance with the rules and regulations of the SEC, which generally provide that a person has beneficial ownership of a security
if he, she or it possesses sole or shared voting or investment power over that security. Shares of our Common Stock subject to options,
warrants or shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock that are currently exercisable or
convertible or exercisable or convertible within 60 days or shares of Common Stock underlying time-based restricted stock units that vest
within 60 days are considered outstanding and beneficially owned by the person holding the options, warrants, shares of preferred stock
or restricted stock units, as applicable, for the purpose of calculating the percentage ownership of that person but not for the purpose
of calculating the percentage ownership of any other person. Accordingly, the ownership percentage of such persons presented below assumes
the exercise or conversion of derivative securities held thereby without assuming exercise or conversion of securities of the same type
held by any other persons and, accordingly, is greater than the percentage that would be owned by such persons if all of the holders of
securities of the same type exercised or converted such securities. Unless otherwise indicated, we believe that the persons and entities
named in the table below have sole voting and investment power with respect to all of our voting securities beneficially owned by them.
Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares
of Common Stock beneficially owned by them.
The percentage of beneficial
ownership is based on 191,881,107 shares of Common Stock issued and outstanding as of December 16, 2024.
Name of Beneficial Owner
(1)
Number of
Shares
Beneficially
Owned
Percentage
Beneficially
Owned
5% or Greater Beneficial Owners:
Keystone Capital Partners, LLC
(2)
25,061,204
13.1
%
Funicular Funds, LP
(3)
22,500,540
11.7
%
SMS Trust
(4)
21,067,956
11.0
%
Arch Venture Fund X, L.P.
(5)
14,219,203
7.4
%
Directors and Executive Officers:
Chris Ehrlich
(6)
7,179,254
3.7
%
Andrew "Al" Kucharchuk
(7)
208,333
*
Kristen Pierce, Ph.D.
(8)
102,073
*
Brian G. Atwood
(9)
19,861,313
10.4
%
Michael Byrnes
(10)
155,625
*
Kathleen LaPorte
(11)
1,127,450
*
Lindsey Rolfe, M.D., Ph.D.
(12)
155,625
*
Shami Patel
(13)
127,500
*
All current directors and executive officers as a group (eight individuals)
28,711,548
14.9
%
*
Represents beneficial ownership of less than 1% of our outstanding Common Stock.
159
(1)
Unless otherwise noted, the business address of each of the following individuals is 210 Haskins Way, Suite 230, South San Francisco, CA 94080.
(2)
Consists of (i) 10,980,316 shares of Common Stock issuable on the conversion of shares of Series A Preferred Stock, (ii) 5,696,429 shares of Common Stock issuable on the conversion of shares of Series C Preferred Stock, (iii) 6,073,184 shares of Common Stock issuable on the conversion of the Series A shares resulting from the exercise of Preferred Warrants, (iv) 61,275 shares of Common Stock issuable on the exercise of Series A Warrants, and (v) 2,250,000 shares of Common Stock issuable on the exercise of Series C Warrants.  The principal business address of Keystone Capital Partners, LLC is 139 Fulton Street, Room 412, New York, NY 10038-2536.
(3)
Consists of (i) 7,546,943 shares of Common Stock issuable on the conversion of shares of Series A Preferred Stock, (ii) 2,343,750 shares of Common Stock issuable on the conversion of shares of Series C Preferred Stock, (iii) 10,121,973 shares of Common Stock issuable on the conversion of the Series A shares resulting from the exercise of Preferred Warrants, (iv) 153,186 shares of Common Stock issuable on the exercise of Series A Warrants, and (v) 2,334,688 shares of Common Stock issuable on the exercise of Series C Warrants.  The principal business address of Funicular Funds, LP is 601 California Street, Suite 1151, San Francisco, CA 94108-2816.
(4)
Consists of 21,067,956 shares of Common Stock. Stuart Sloan is the trustee of SMS Trust. The business address of SMS Trust is 4734 25th Ave NE, Seattle, WA 98105.
(5)
Consists of (i) 437,124 shares of Common Stock and 13,782,079 shares of Common Stock issuable on the conversion of shares of Series A Preferred Stock. The principal business address of ARCH venture Fund X, L.P. is 8755 W Higgens Road, Suite 1025, Chicago, IL  60631-2778.
(6)
Consists of (i) 7,066,808 shares of Common Stock, (ii) 10,000 shares of Common Stock issuable upon the exercise of Warrants exercisable within 60 days of December 16, 2024, (iii) 98,846 shares of Common Stock issuable pursuant to stock options exercisable within 60 days of December 16, 2024, and (iv) 3,600 shares of Common Stock held by his spouse, Sara Fried.
(7)
Consists of 208,333 shares of Common Stock, issuable pursuant to stock options exercisable within 60 days of December 16, 2024.
(8)
Consists of 102,073 shares of Common Stock issuable pursuant to stock options exercisable within 60 days of December 16, 2024.
(9)
Consists of (i) 19,607,313
    shares of Common Stock, held by the Atwood-Edminster Trust dtd 4-2-2000, of which Mr. Atwood serves as a trustee and (ii) 254,000 shares of Common Stock held by Mr. Atwood.
(10)
Consists of (i) 127,500
    shares of Common Stock held by Mr. Byrnes and (ii) 28,125 shares of Common Stock issuable pursuant to stock options exercisable
    within 60 days of December 16, 2024
(11)
Consists of (i) 133,328 shares of Common Stock held by Kathleen LaPorte, (ii) 965,997 shares of Common Stock, held by the Kathleen LaPorte Revocable Trust, of which Ms. LaPorte serves as a trustee, and (iii) 28,125 shares of Common Stock issuable pursuant to stock options exercisable within 60 days of December 16, 2024.
(12)
Consists of (i) 127,500
    shares of Common Stock held by Dr. Rolfe and (ii) 28,125 shares of Common Stock issuable pursuant to stock options exercisable
    within 60 days of December 16, 2024.
(13)
Consists of 127,500 shares of Common Stock held by Shami Patel as of
December 16, 2024.
160
Equity Compensation Plan Information
The following table sets forth information as
of December 31, 2023 regarding shares of Common Stock that may be issued under our equity compensation plans. Such information includes
equity compensation plans of Legacy CERo as of December 31, 2023 that were assumed by us in the Business Combination:
Plan Category
Number of
Securities
to be Issued
Upon
Exercise of
Outstanding
Options,
Warrants
and Rights
Weighted-
average
Exercise
Price of
Outstanding
Options,
Warrants,
Rights
Number of
Securities
Remaining
Available for
Future
Issuance
Under Equity
Compensation
Plans
Equity compensation plans approved by stockholders
—
$
—
—
Equity compensation plans not approved by stockholders
782,499
(1)
0.28
(2)
—
Total
782,499
$
0.28
—
(1)
Includes 50,433 shares subject to outstanding stock options under the 2016 Plan that were outstanding on December 31, 2023 (presented on an as-converted basis). No new awards may be granted under the 2016 Plan.
(2)
Reflects the weighted-average exercise price of the $4.19 outstanding stock options under the 2016 Plan, presented on an as-converted basis.
Does not reflect shares reserved and available for issuance under the 2024 Plan or 2024 ESPP, as such plans were not in effect as of December 31, 2023. On February 8, 2024, the stockholders approved the 2024 Plan and 2024 ESPP, with an initial reserve of 5,172,590 and 527,182 shares of common stock, respectively. The 2024 Plan and 2024 ESPP became effective on February 14, 2024 in connection with the closing of the Business Combination. At a special meeting of stockholders on April 30, 2024, the stockholders approved an increase in the number of shares available for issuance under the 2024 Plan and the number of shares that may be issued pursuant to incentive stock options, by an additional 2,000,000 shares each. At a special meeting of stockholders on November 11, 2024, the stockholders approved an increase in the number of shares available for issuance under the 2024 Plan and the number of shares that may be issued pursuant to incentive stock options, by an additional 20,845,391 shares each. As of December 16, 2024, the board of directors have granted an aggregate of 6,107,373 option awards under the 2024 Plan, leaving 21,910,608 shares reserved for future issuance under the 2024 Plan. As of December 16, 2024, no awards have been granted under the 2024 ESPP. No new awards may be granted under the 2016 Plan, but all outstanding awards under the 2016 Plan continue to be governed by their existing terms. The 2024 Plan has an evergreen provision that allows for an annual increase in the number of shares available for issuance under the 2024 Plan to be added on the first day of January, starting with January 1, 2025, in an amount equal to the lesser of (i) 5% of the fully diluted shares of our common stock on the immediately preceding December 31 or (ii) such number of shares as determined by our board in each case subject to adjustment in the event of a stock split, stock dividend or other change in our capitalization. The 2024 ESPP has an evergreen provision that allows for an annual increase in the number of shares available for issuance under the 2024 ESPP to be added on the first day of each January, starting with January 1, 2024, by the lesser of (i) 1,019,850 shares of our common stock, (ii) 1% of the fully diluted shares of common stock on the immediately preceding December 31, or (iii) such number of shares of common stock as determined by our board. The number of shares reserved under the 2023 ESPP is subject to adjustment in the event of a stock split, stock dividend or other change in our capitalization.
161
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Certain Relationships and Transactions
Other than the compensation
agreements and other arrangements described under the sections entitled "
Executive Compensation
" and "
Director
Compensation
" above and the transactions described below, since January 1, 2022, there has not been and there is not currently
proposed, any transaction or series of similar transactions to which we were, or will be, a party in which:
●
the amount involved exceeded, or will exceed, $120,000 (or, if less, 1% of the average of our total asset amounts at December 31, 2022 and 2023); and
●
any director, executive officer, holder of 5% or more of any class of our capital stock or any member of the immediate family of, or entities affiliated with, any of the foregoing persons, had, or will have, a direct or indirect material interest.
PBAX Relationships and Related Party Transactions
Related Party Loans
In order to finance transaction
costs in connection with the Business Combination, the Sponsor or an affiliate of the Sponsor or certain of PBAX's officers and
directors may, but are not obligated to, to loan PBAX funds as may be required. On December 13, 2022, PBAX issued an unsecured promissory
note in the principal amount of $1,500,000 (the "Promissory Note") to the Sponsor, pursuant to which the Sponsor agreed to
loan to the PBAX up to $1,500,000. On December 8, 2023, the Promissory Note was amended to increase the total principal amount to
$1,600,000. At the Closing, an aggregate of approximately $1.55 million that had been borrowed under the Promissory Note was extinguished
and converted into an aggregate of 1,380 shares of Series A Preferred Stock.
Administrative Services
Commencing on October 6,
2021, PBAX paid an amount equal to $20,000 per month to the Sponsor or its affiliate or designee for office space, administrative and
shared personnel support services provided to PBAX. Such administrative support services ended on December 31, 2022.
Advisory Services
We engaged CCM, an affiliate
of PBAX, the Sponsor and/or certain of its directors and officers, to provide consulting and advisory services in connection with the
IPO, for which it was entitled to a fee in an amount equal to $465,000, which was paid to CCM upon the closing of the IPO, and $1,162,500,
which would have been paid to CCM upon the Closing. In connection with the Closing, PBAX entered into a fee modification agreement with
CCM pursuant to which CCM forfeited such fees and we issued an aggregate of 1,200,000 shares of Common Stock, with 1,000,000 of such shares
being subject to forfeiture unless we conduct a capital-raising transaction within nine months of the Closing, pursuant to which we shall
issue and sell securities in an aggregate amount of at least $25.0 million, affiliates of CCM have and manage investment vehicles with
a passive investment in the Sponsor.
CERo Relationships and Related Party Transactions
Collaboration and Option Agreement
On March 3, 2020, Legacy
CERo entered into a collaboration and option agreement ("Collaboration Agreement") with a collaborative partner that was an
investor of Legacy CERo, pursuant to which each party was granted a royalty-free, nonexclusive, worldwide license to share the other party's
technologies to create bi-functional T-cells. Legacy CERo was responsible for all employee and other internal costs incurred in the
performance of all of Legacy CERo's R&D activities, with approved cost overruns funded by the collaborative partner. At the
end of the research project, the collaborative partner would be granted the option to enter into an exclusive license for the further
development of the combined drug. Under the Collaboration Agreement, the collaborative partner paid us $182,577 and $0 for the years ended
December 31, 2022 and 2023. The Collaboration Agreement terminated on March 3, 2023.
162
PIPE Financings
In February 2024, we issued and sold an aggregate
of 10,039 shares of Series A Preferred Stock, 612,746 Series A Warrants and 2,500 Preferred Warrants, at a price of $1,000 per share of
Series A Preferred Stock, for aggregate cash proceeds of approximately $8.0 million, plus additional cash proceeds of up to $2.0 million
if the Preferred Warrants are exercised.
The following table summarizes the shares of our
Series A Preferred Stock issued to our related parties:
Purchasers
(1)
Shares of Series A
Preferred Stock
Total
Purchase
Price
Daniel Corey
(2)
150
$
150,000
Atwood-Edminster Trust dtd 4-2-2000
(3)
1,002
$
1,002,000
Chris Ehrlich
(4)
275
$
275,000
Phoenix Biotech Sponsor, LLC
(5)
1,380
$
1,380,000
(1)
Additional details regarding these stockholders and their equity holdings are included in this prospectus under the section "
Principal Stockholders
."
(2)
Daniel Corey served as the Chief Technology Officer and a member of the board of directors from February 2024 to September 2024, and previously served as Chief Executive Officer, Chief Scientific Officer, and a member of the board of directors of Legacy CERo until the closing of the Business Combination in February 2024.
(3)
Brian G. Atwood served as Chairman and Chief Executive Officer from February 2024 to September 2024, and previously served as Chairman of PBAX until the closing of the Business Combination in February 2024 Mr. Atwood is a member of the board of directors and serves as a trustee of Atwood-Edminster Trust dtd 4-2-2000.
(4)
Chris Ehrlich has served as the Chairman and Chief Executive Officer since December 2024, and previously served as (i) interim Chairman and Chief Executive Officer from October 2024 to November 2024, (ii) Vice Chairman of the board of directors from February 2024 to September 2024, and (iii) the Chief Executive Officer of PBAX until the closing of the Business Combination in February 2024.
(5)
Phoenix Biotech Sponsor, LLC beneficially owned more than 5% of our outstanding capital stock at the time of the transaction.
Policies and Procedures for Related Party Transactions
We have adopted a code of
conduct and ethics requiring us to avoid, wherever possible, all conflicts of interests, except under guidelines or resolutions approved
by the board of directors (or the appropriate committee of the board of directors) or as disclosed in public filings with the SEC. Under
the adopted code of conduct and ethics, conflict of interest situations include any financial transaction, arrangement or relationship
(including any indebtedness or guarantee of indebtedness) involving us.
In addition, pursuant to
the Audit Committee charter, our Audit Committee is responsible for reviewing and approving related party transactions to the extent that
we entered into such transactions. An affirmative vote of a majority of the members of the Audit Committee present at a meeting at which
a quorum is present will be required in order to approve a related party transaction. Without a meeting, the unanimous written consent
of all of the members of the Audit Committee will be required to approve a related party transaction. We also require each of our directors
and officers to complete a directors' and officers' questionnaire that elicits information about related party transactions.
These procedures are intended to determine whether any such related party transaction impairs the independence of a director or presents
a conflict of interest on the part of a director, employee or officer.
Our Audit Committee reviews
on a quarterly basis all payments that were made to the officers or directors, or to their affiliates.
163
DESCRIPTION OF SECURITIES
General
We are authorized to issue
up to 1,000,000,000 shares of Common Stock, and 10,000,000 shares of Preferred Stock.
Preferred Stock
Our Board is authorized to
issue "blank check" Preferred Stock, which may be issued in one or more series upon the authorization of the Board. The Board
is authorized to fix the designations, powers, preferences and the relative, participating, optional or other special rights and any qualifications,
limitations and restrictions of the shares of each series of Preferred Stock. The authorized shares of the Preferred Stock are available
for issuance without further action by our stockholders, unless such action is required by applicable law or the rules of any stock exchange
on which the securities may be listed. If the approval of our stockholders is not required for the issuance of shares of the Preferred
Stock, the Board may determine not to seek stockholder approval.
The Board will be able to,
without stockholder approval, issue Preferred Stock with voting and other rights that could adversely affect the voting power and other
rights of the holders of the Common Stock and could have anti-takeover effects. The ability of the Board to issue Preferred Stock without
stockholder approval could have the effect of delaying, deferring or preventing a change of control of us or the removal of existing management.
Series A Convertible Preferred Stock
We designated 12,580 shares
of our authorized and unissued Preferred Stock as Series A Preferred Stock and established the rights, preferences and privileges of the
Series A Preferred Stock pursuant to the Series A Certificate of Designations filed with the Secretary of State of the State of Delaware,
as summarized below.
General
. Each share
of Series A Preferred Stock has a stated value of $1,000 per share and, when issued, the Series A Preferred Stock was fully paid and non-assessable.
Ranking
. The Series
A Preferred Stock, with respect to the payment of dividends, distributions and payments upon the liquidation, dissolution and winding
up of us, ranks senior to all capital stock of us unless the Required Holders (as defined in the Series A Certificate of Designations)
consent to the creation of other capital stock of us that is senior or equal in rank to the Series A Preferred Stock.
Dividends
. The holders
of Series A Preferred Stock will be entitled to dividends, on an as-if converted basis, equal to and in the same form as dividends actually
paid on shares of Common Stock, when and if actually paid.
Purchase Rights
. If
at any time we grant, issue or sell any options, convertible securities, or rights to purchase stock, warrants, securities or other property
pro rata to all or substantially all of the record holders of any class of Common Stock (the "Purchase Rights"), then each
holder of Series A Preferred Stock will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase
Rights which such holder could have acquired if such holder had held the number of shares of Common Stock acquirable upon complete conversion
of all the Series A Preferred Stock held by such holder immediately prior to the date as of which the record holders of shares of Common
Stock are to be determined for the grant, issue or sale of such Purchase Rights at the Alternate Conversion Price (as defined in the Series
A Certificate of Designations); subject to certain limitations on beneficial ownership.
Conversion Rights
Conversion at Option of
Holder
. Each holder of Series A Preferred Stock may convert all, or any part, of the outstanding Series A Preferred Stock, at any
time at such holder's option, into shares of the Common Stock (which converted shares of Common Stock are referred to as "Conversion
Shares" herein) at the fixed "Conversion Price" of $10.00, which is subject to proportional adjustment upon the occurrence
of any stock split, stock dividend, stock combination and/or similar transactions.
164
Voluntary Adjustment Right
.
Subject to the rules and regulations of the Nasdaq, we have the right, at any time, with the written consent of the Required Holders (as
defined in the Series A Certificate of Designations), to lower the fixed conversion price to any amount and for any period of time deemed
appropriate by the Board.
Alternate Conversion Upon
a Triggering Event
. Following the occurrence and during the continuance of a Triggering Event (as defined below), each holder may
alternatively elect to convert the Series A Preferred Stock at the "Alternate Conversion Price" equal to the lesser of:
●
the Conversion Price, and
●
the greater of:
●
the floor price of $1.00; and
●
80% of the volume weighted average price of the Common Stock during the 5 consecutive trading days immediately prior to such conversion.
The Series A Certificate
of Designations contains standard and customary triggering events (each, a "Series A Triggering Event"), including but not
limited to: (i) the suspension from trading or the failure to list the Common Stock within certain time periods; (ii) failure to declare
or pay any dividend when due; (iii) the failure to timely file or make effective a registration statement on Form S-1 pursuant to the
Registration Rights Agreement, dated as of February 14, 2024, by and between us and the holders of Series A Preferred Stock party thereto
(the "PIPE Registration Rights Agreement"), (iv) our failure to cure a conversion failure of failure to deliver shares of
the Common Stock under the Series A Warrants, Preferred Warrants, and all warrants issued in exchange therefor or replacement thereof
(the "Structuring Warrants") or notice of our intention not to comply with a request for conversion of any Series A Preferred
Stock or a request for exercise of any Structuring Warrants, and (v) bankruptcy or insolvency of us.
July Alternate Conversion
Event
. On July 5, 2024, the resale registration statement on Form S-1, which included the shares of Common Stock underlying the conversion
of the Series A Preferred Stock and Series B Preferred Stock, was declared effective. On the effectiveness of this S-1, the conversion
price of the Preferred Stock reset to $1.00 per share. The Series A Certificate of Designations defines a number of conditions that trigger
an Alternate Conversion Right, such right extending from the onset of the condition to 20 trading days after the condition is cured. Due
to late registration, the period of Alternate Conversion Right was from July 5, 2024 to August 2, 2024. The Alternate Conversion Right
triggered by late registration resulted in a 25% premium added to the conversion amount. At the time of Alternate Conversion, the Alternate
Conversion Price is the lowest of (a) the Conversion Price and (b) the greater of (i) the floor price and (ii) 80% of the lowest daily
VWAP of the Common Stock during the five trading days immediately preceding the date of conversion notice submission. However, because
the floor price was greater than 80% of the five-day volume-weighted average price of a share of Common Stock, the conversion amount was
further increased by a multiplier resulting in the convertibility of the shares of Series A Preferred Stock into the number of shares
of Common Stock that would have been issuable if the Alternate Conversion Price had been equal to such lower volume weighted average price.
Other Adjustments
.
If 90 days or 180 days following the occurrence of the later of (x) the Stockholder Approval Date (as defined below) and (y) the earlier
of (a) the effective date of the registration statement to be filed pursuant to the PIPE Registration Rights Agreement and (b) the date
that the Series A Preferred Stock is eligible to be resold without restriction under Rule 144 of the Securities Act, the Conversion Price
then in effect is greater than the greater of $1.00 and the Market Price (as defined in the Series A Certificate of Designations) then
in effect (the "Series A Adjustment Price"), the Conversion Price shall automatically lower to the Series A Adjustment Price.
Limitations on Conversion
.
In no event shall the Series A Preferred Stock be convertible into a number of shares of Common Stock exceeding 19.99% of the total number
of shares of Common Stock outstanding immediately prior to the execution of the applicable Securities Purchase Agreement, except that
such limitation shall not apply in the event that we obtain approval from our stockholders for the issuance of such shares in accordance
with the applicable stock exchange rules (the date of such approval, the "First Stockholder Approval Date").
165
Bankruptcy Triggering
Event Redemption Right
. Upon any bankruptcy Series A Triggering Event, we shall immediately redeem in cash all amounts due under the
Series A Preferred Stock at 25% premium (or, if 18 months following the issuance date, 50% premium) to the greater of (x) the amount of
shares of Series A Preferred Stock then outstanding and (y) the equity value of the shares of Series A Preferred Stock then outstanding,
unless the holder waives such right to receive such payment. The equity value of the Common Stock underlying the Series A Preferred Stock
is calculated using the greatest closing sale price of the Common Stock on any trading day immediately preceding such bankruptcy Series
A Triggering Event and the date we make the entire payment required.
Change of Control Exchange.
Upon a change of control, each holder may require us to exchange the holder's shares of Series A Preferred Stock for consideration
equal to the change of Control Election Price (as defined in the Series A Certificate of Designations), to be satisfied at our election
in either (x) cash or (y) rights convertible into such securities or other assets to which such holder would have been entitled with respect
to such shares of Common Stock had such shares of Common Stock been held by such holder upon consummation of such corporate event.
Company Optional Redemption
.
At any time we shall have the right to redeem in cash all, but not less than all, the shares of Series A Preferred Stock then outstanding
at a 20% redemption premium to the greater of (x) the amount of shares being redeemed, and (y) the equity value of the Common Stock underlying
the Series A Preferred Stock. The equity value of the Common Stock underlying the Series A Preferred Stock is calculated using the greatest
closing sale price of the Common Stock on any trading day immediately preceding the date we notify the holders of our election to redeem
and the date we make the entire payment required.
Fundamental Transactions
.
The Series A Certificate of Designations prohibit us from entering specified fundamental transactions (including, without limitation,
mergers, business combinations and similar transactions) unless we (or our successor) assumes in writing all of our obligations under
the Series A Certificate of Designations and the other Transaction Documents (as defined in the Series A Certificate of Designations).
Voting Rights
. The
holders of the Series A Preferred Stock shall have no voting power and no right to vote on any matter at any time, either as a separate
series or class or together with any other series or class of share of capital stock, and shall not be entitled to call a meeting of such
holders for any purpose nor shall they be entitled to participate in any meeting of the holders of Common Stock, except as provided in
the Series A Certificate of Designations (or as otherwise required by applicable law).
Covenants
. The Series
A Certificate of Designations contains a variety of obligations on our part not to engage in specified activities, which are typical for
transactions of this type. In particular, we will not, and will cause our subsidiaries to not, redeem, repurchase or declare any dividend
or distribution on any of our capital stock (other than as required under the Series A Certificate of Designations). In addition, we will
not issue any preferred stock or issue any other securities that would cause a breach or default under the Series A Certificate of Designations
or Structuring Warrants.
Reservation Requirements
.
So long as any Series A Preferred Stock remains outstanding, we shall at all times reserve at least 150% of the number of shares of Common
Stock as shall from time to time be necessary to effect the conversion of all Series A Preferred Stock then outstanding.
Series B Convertible Preferred Stock
We designated 626 shares
of our authorized and unissued Preferred Stock as Series B Preferred Stock and established the rights, preferences and privileges of the
Series B Preferred Stock pursuant to the Series B Certificate of Designations filed with the Secretary of State of the State of Delaware,
as summarized below. Except as set forth below, the Series B Preferred Stock has terms and provisions that are identical to those of the
Series A Preferred Stock.
Ranking
. The Series
B Preferred Stock, with respect to the payment of dividends, distributions and payments upon the liquidation, dissolution and winding
up of us, ranks senior to all capital stock of us unless the Required Holders (as defined in the Series B Certificate of Designations)
or the requisite holders of the outstanding shares of the Series A Preferred Stock (the "Series A Requisite Holders") consent
to the creation of other capital stock of us that is senior or equal in rank to the Series B Preferred Stock. The Series B Preferred Stock
ranks
pari passu
with the Series A Preferred Stock.
166
Covenants
. The Series
B Certificate of Designations contains a variety of obligations on our part not to engage in specified activities, which are typical for
transactions of this type. In particular, we will not, and will cause our subsidiaries to not, redeem, repurchase or declare any dividend
or distribution on any of our capital stock (other than as required under the Series B Certificate of Designations). In addition, we will
not issue any preferred stock or issue any other securities that would cause a breach or default under the Series B Certificate of Designations.
Any waiver or amendment of the foregoing covenants by the Series A Requisite Holders shall be deemed to be a waiver or amendment by the
Required Holders (as defined in the Series B Certificate of Designations) under the Series B Certificate of Designations.
Series C Convertible Preferred Stock
We designated 2,853 shares
of our authorized and unissued Preferred Stock as Series C Preferred Stock and established the rights, preferences and privileges of the
Series C Preferred Stock pursuant to the Series C Certificate of Designations filed with the Secretary of State of the State of Delaware,
as summarized below. Except as set forth below, the Series C Preferred Stock has terms and provisions that are substantially the same
as those of the Series A Preferred Stock and Series B Preferred Stock.
Ranking
. The Series
C Preferred Stock, with respect to the payment of dividends, distributions and payments upon the liquidation, dissolution and winding
up of us, ranks senior to all capital stock of us (including the Series A Preferred Stock and the Series B Preferred Stock) unless the
Required Holders (as defined in the Series C Certificate of Designations) consent to the creation of other capital stock of us that is
senior or equal in rank to the Series C Preferred Stock.
Conversion Rights
Conversion at Option of
Holder
. Each holder of Series C Preferred Stock may convert all, or any part, of the outstanding Series C Preferred
Stock, at any time at such holder's option, into shares of the Common Stock (which converted shares of Common Stock are referred
to as "Conversion Shares" herein) at the fixed "Conversion Price" of $0.224, which is subject to proportional
adjustment upon the occurrence of any stock split, stock dividend, stock combination and/or similar transactions.
Alternate Conversion Upon
a Triggering Event
. Following the occurrence and during the continuance of a Triggering Event (as defined below), each holder may
alternatively elect to convert the Series C Preferred Stock at the "Alternate Conversion Price" equal to the lesser
of:
●
the Conversion Price, and
●
the greater of:
●
the floor price of $0.0196; and
●
80% of the volume weighted average price of the Common Stock during the 5 consecutive trading days immediately prior to such conversion.
The Certificate of Designations
contains standard and customary triggering events (each, a "Series C Triggering Event"), including but not limited to: (i)
the suspension from trading or the failure to list the Common Stock within certain time periods; (ii) failure to declare or pay any dividend
when due; (iii) the failure to timely file or make effective a registration statement on Form S-1 pursuant to the Registration Rights
Agreement, dated as of September 25, 2024, by and between the Company and the holders of Series A Preferred Stock party thereto (the "Second
Registration Rights Agreement"), (iv) our failure to cure a conversion failure of failure to deliver shares of the Common Stock
under the Series C Warrants, or notice of our intention not to comply with a request for conversion of any Series C Preferred Stock or
a request for exercise of any Series C Warrants, and (iv) bankruptcy or insolvency of us.
167
If at the time of a conversion
the Alternate Conversion Price is determined to be the Floor Price because such Floor Price is greater than 80% of the five-day volume
weighted average price of a share of Common Stock, then the Conversion Amount (as defined in the Certificates of Designations), shall
automatically increase such that the shares of Series C Preferred Stock issuable upon such conversion are equal to the number of shares
of Common Stock that would have been issuable if the Alternate Conversion Price had been equal to 80% of the volume weighted average price
of the Common Stock during the five consecutive trading days immediately prior to such conversion.
Other Adjustments
.
In connection with the Private Placement, we have agreed to seek stockholder approval at a special meeting of stockholders to be held
not later than December 15, 2024 of the issuance of Conversion Shares at a conversion price below the Conversion Price (the date of such
approval, the "Second Stockholder Approval Date"). If, on or after the Stockholder Approval Date, we issue any shares of Common
Stock for a consideration per share (the "New Issuance Price") less than a price equal to the Conversion Price in effect immediately
prior to such issuance, the Conversion Price shall be reduced to the New Issuance Price.
If 30 days or 60 days following
the occurrence of the later of (x) the Second Stockholder Approval Date and (y) the earlier of (a) the effective date of the registration
statement to be filed pursuant to the Second Registration Rights Agreement and (b) the date that the Series C Preferred Stock is
eligible to be resold without restriction under Rule 144 of the Securities Act, the Conversion Price then in effect is
greater than the greater of $0.0196 and the Market Price (as defined in the Series C Certificate of Designations) then in effect (the
"Series C Adjustment Price"), the Conversion Price shall automatically lower to the Series C Adjustment Price.
Covenants
. The Series
C Certificate of Designations contains a variety of obligations on our part not to engage in specified activities, which are typical for
transactions of this type. In particular, we will not, and will cause our subsidiaries to not, redeem, repurchase or declare any dividend
or distribution on any of our capital stock (other than as required under the Series C Certificate of Designations) and will not incur
any indebtedness other than ordinary course trade payables or, subject to certain exceptions, incur any liens. In addition, we will not
issue any preferred stock or issue any other securities that would cause a breach or default under the Series C Certificate of Designations.
Any waiver or amendment of the foregoing covenants by the Required Holders (as defined in the Series C Certificate of Designations) shall
be deemed to be a waiver or amendment by the Required Holders (as defined in the Series C Certificate of Designations) under the Series
C Certificate of Designations or Series C Warrants.
Reservation Requirements
.
So long as any Series C Preferred Stock remains outstanding, we shall at all times reserve at least 250% of the number of shares
of Common Stock as shall from time to time be necessary to effect the conversion of all Series C Preferred Stock then outstanding.
Common Stock
Voting
Each holder of Common Stock
is entitled to one vote for each share on all matters submitted to a vote of the stockholders, including the election of directors, with
the exception of certain matters relating solely to the terms of one or more outstanding series of preferred stock. Under the Charter,
our stockholders do not have cumulative voting rights. Because of this, the holders of a majority of the shares of Common Stock entitled
to vote in any election of directors can elect all of the directors standing for election.
Dividends
Subject to preferences that
may apply to any then-outstanding Preferred Stock, the holders of Common Stock are entitled to receive ratably those dividends, if any,
as may be declared from time to time by the Board out of legally available funds.
Liquidation
In the event of our liquidation,
dissolution or winding up, holders of Common Stock will be entitled to share ratably in the net assets legally available for distribution
to stockholders after the payment of all of our debts and other liabilities and the satisfaction of any liquidation preference granted
to the holders of any then-outstanding shares of Preferred Stock.
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Preemptive or Similar Rights
Holders of Common Stock have
no preemptive, conversion or subscription rights and there are no redemption or sinking fund provisions applicable to the Common Stock.
The rights, preferences and privileges of the holders of Common Stock are subject to, and may be adversely affected by, the rights of
the holders of shares of any series of Preferred Stock that we may designate in the future.
Warrants
The outstanding warrants
consist of (i) Public Warrants, (ii) Private Placement Warrants, (iii) warrants initially issued by CERo Therapeutics, Inc. and converted
into warrants to purchase Common Stock in connection with our initial business combination (the "Conversion Warrants"), (iv)
the Series A Warrants, (v) the Series C Warrants and (vi) the Preferred Warrants.
Public Warrants
General
. Each Public
Warrant entitles the registered holder to purchase one share of Common Stock at a price of $11.50 per share, subject to adjustment as
discussed below, commencing 30 days after the completion of the initial business combination. The Public Warrants are governed by the
terms of a Warrant Agreement, dated as of October 5, 2021 between us and Continental Stock Transfer & Trust Company, as warrant agent
(the "Warrant Agreement"). Pursuant to the Warrant Agreement, a warrant holder may exercise its Public Warrants only for a
whole number of shares of Common Stock. This means that only a whole Public Warrant may be exercised at any given time by a warrant holder.
No fractional Public Warrants will be issued and only whole Public Warrants will trade. The Public Warrants will expire five years after
the completion of the initial business combination, at 5:00 p.m., New York City time, or earlier upon redemption or liquidation.
Registration of Public
Warrants.
We will not be obligated to deliver any shares of Common Stock pursuant to the exercise for cash of a Public Warrant and
will have no obligation to settle such warrant exercise unless a registration statement under the Securities Act with respect to the shares
of Common Stock underlying the Public Warrants is then effective and a prospectus relating thereto is current, subject to our satisfying
our obligations described below with respect to registration. No Public Warrant will be exercisable and we will not be obligated to issue
shares of Common Stock upon exercise of a Public Warrant unless Common Stock issuable upon such warrant exercise has been registered,
qualified or deemed to be exempt from the registration or qualifications requirements of the securities laws of the state of residence
of the registered holder of the Public Warrants. Notwithstanding the foregoing, if a registration statement covering the shares of Common
Stock issuable upon exercise of the Public Warrants has not been declared effective by the end of 60 business days following the closing
of the initial business combination, warrantholders may, until such time as there is an effective registration statement and during any
period when we shall have failed to maintain an effective registration statement, exercise Public Warrants on a cashless basis pursuant
to the exemption provided by Section 3(a)(9) of the Securities Act.
We have agreed that as soon
as practicable, but in no event later than 20 business days after the closing of the initial business combination, we will use our best
efforts to file with the SEC, and within 60 business days following the initial business combination to have declared effective, a registration
statement covering the issuance of the shares of Common Stock issuable upon exercise of the Public Warrants and to maintain a current
prospectus relating to those shares of Common Stock until the Public Warrants expire or are redeemed, as specified in the Warrant Agreement.
If a registration statement covering the shares of Common Stock issuable upon exercise of the Public Warrants is not effective by the
60
th
business day after the closing of the initial business combination, warrantholders may, until such time as there is an
effective registration statement and during any period when we will have failed to maintain an effective registration statement, exercise
Public Warrants on a "cashless basis" in accordance with Section 3(a)(9) of the Securities Act or another exemption. In addition
to the above, if Common Stock is at the time of any exercise of a Public Warrant not listed on a national securities exchange such that
it satisfies the definition of a "covered security" under Section 18(b)(1) of the Securities Act, we may, at our option, require
holders of Public Warrants who exercise their Public Warrants to do so on a "cashless basis" in accordance with Section 3(a)(9)
of the Securities Act and, in the event we so elects, we will not be required to file or maintain in effect a registration statement,
and in the event it does not so elect, it will use our best efforts to register or qualify the shares under applicable blue sky laws to
the extent an exemption is not available.
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Redemption of Warrants.
Once the Public Warrants become exercisable, we may call the Public Warrants for redemption:
●
in whole and not in part;
●
at a price of $0.01 per warrant;
●
upon not less than 30 days' prior written notice of redemption (the "30-day redemption period") to each warrant holder; and
●
if an only if, the reported last sale price of Common Stock (or the closing bid price of our common stock in the event shares of Common Stock are not traded on any specific day) equals or exceeds $18.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalization and the like) for any 20 trading days within a 30 day trading period ending three business days before we send the notice of redemption to the warrantholders.
If and when the Public Warrants
become redeemable by us, it may exercise its redemption right even if it is unable to register or qualify the underlying securities for
sale under all applicable state securities laws.
We have established the last
of the redemption criterion discussed above to prevent a redemption call unless there is at the time of the call a significant premium
to the warrant exercise price. If the foregoing conditions are satisfied and we issue a notice of redemption of the Public Warrants, each
warrant holder will be entitled to exercise its warrant prior to the scheduled redemption date. However, the price of the Common Stock
may fall below the $18.00 redemption trigger price (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations
and the like) as well as the $11.50 (for whole shares) warrant exercise price after the redemption notice is issued.
Cashless Exercise.
If we call the Public Warrants for redemption as described above, our management will have the option to require any holder that wishes
to exercise its Public Warrant to do so on a "cashless basis." In determining whether to require all holders to exercise their
Public Warrants on a "cashless basis," Our management will consider, among other factors, our cash position, the number of
Public Warrants that are outstanding and the dilutive effect on our stockholders of issuing the maximum number of shares of Common Stock
issuable upon the exercise of our warrants. If our management takes advantage of this option, all holders of Public Warrants would pay
the exercise price by surrendering their warrants for that number of shares of Common Stock equal to the quotient obtained by dividing
(x) the product of the number of shares of Common Stock underlying the Public Warrants, multiplied by the difference between the exercise
price of the Public Warrants and the "fair market value" (defined below) by (y) the fair market value. The "fair market
value" shall mean the average reported last sale price of the Common Stock for the 10 trading days ending on the third trading day
prior to the date on which the notice of redemption is sent to the holders of Public Warrants. If our management takes advantage of this
option, the notice of redemption will contain the information necessary to calculate the number of shares of Common Stock to be received
upon exercise of the Public Warrants, including the "fair market value" in such case. Requiring a cashless exercise in this
manner will reduce the number of shares to be issued and thereby lessen the dilutive effect of a warrant redemption.
A holder of a Public Warrant
may notify us in writing in the event it elects to be subject to a requirement that such holder will not have the right to exercise such
warrant, to the extent that after giving effect to such exercise, such person (together with such person's affiliates), to the warrant
agent's actual knowledge, would beneficially own in excess 9.8% (or such other amount as a holder may specify) of the shares of
Common Stock outstanding immediately after giving effect to such exercise.
170
Anti-Dilution Adjustments.
If the number of outstanding shares of Common Stock is increased by a stock dividend payable in shares of Common Stock, or by a split-up
of shares of Common Stock or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the number
of shares of Common Stock issuable on exercise of each warrant will be increased in proportion to such increase in the outstanding shares
of Common Stock. A rights offering to holders of Common Stock entitling holders to purchase shares of Common Stock at a price less than
the fair market value will be deemed a stock dividend of a number of shares of Common Stock equal to the product of (i) the number of
shares of Common Stock actually sold in such rights offering (or issuable under any other equity securities sold in such rights offering
that are convertible into or exercisable for Common Stock) multiplied by (ii) one (1) minus the quotient of (x) the price per share of
Common Stock paid in such rights offering divided by (y) the fair market value. For these purposes (i) if the rights offering is for securities
convertible into or exercisable for Common Stock, in determining the price payable for Common Stock, there will be taken into account
any consideration received for such rights, as well as any additional amount payable upon exercise or conversion and (ii) fair market
value means the volume weighted average price of Common Stock as reported during the 10 trading day period ending on the trading day prior
to the first date on which the shares of Common Stock trade on the applicable exchange or in the applicable market, regular way, without
the right to receive such rights.
In addition, if we, at any
time while the Public Warrants are outstanding and unexpired, pay a dividend or makes a distribution in cash, securities or other assets
to the holders of Common Stock on account of such shares of Common Stock (or other shares of our capital stock into which the Public Warrants
are convertible), other than (a) as described above or (b) any cash dividends or cash distributions which, when combined on a per share
basis with all other cash dividends and cash distributions paid on the shares of Common Stock during the 365-day period ending on the
date of declaration of such dividend or distribution does not exceed $0.50 (as adjusted to appropriately reflect any other adjustments
and excluding cash dividends or cash distributions that resulted in an adjustment to the exercise price or to the number of shares of
Common Stock issuable on exercise of each warrant) but only with respect to the amount of the aggregate cash dividends or cash distributions
equal to or less than $0.50 per share.
If the number of outstanding
shares of Common Stock is decreased by a consolidation, combination, reverse stock split or reclassification of shares of Common Stock
or other similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar
event, the number of shares of Common Stock issuable on exercise of each Public Warrant will be decreased in proportion to such decrease
in outstanding shares of Common Stock.
Whenever the number of shares
of Common Stock purchasable upon the exercise of the Public Warrants is adjusted, as described above, the warrant exercise price will
be adjusted by multiplying the warrant exercise price immediately prior to such adjustment b a fraction (x) the numerator of which will
be the number of shares of Common Stock purchasable upon the exercise of the Public Warrants immediately prior to such adjustment, and
(y) the denominator of which will be the number of shares of Common Stock to purchase immediately thereafter.
In case of any reclassification
or reorganization of the issued and outstanding shares of Common Stock (other than those described above or that solely affects the par
value of such shares of Common Stock), or in the case of any merger or consolidation of us with or into another entity (other than a consolidation
or merger in which we are the continuing corporation and that does not result in any reclassification or reorganization of our issued
and outstanding shares of Common Stock) in which any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act) acquired more than 50% of the voting power of our securities in a transaction that results in a Change
of Control Transaction (as defined in the Warrant Agreement), or in the case of any sale or conveyance to another corporation or entity
of the assets or other property of us as an entirety or substantially as an entirety, the holders of Public Warrants will thereafter have
the right to purchase and receive, upon the basis and upon the terms and conditions specified in the Public Warrants and in lieu of shares
of Common Stock immediately theretofore purchasable and receivable upon the exercise of the rights represented thereby, the kind and amount
of shares of Common Stock or other securities or property (including cash) receivable upon such reclassification, reorganization, merger
or consolidation, or upon a dissolution following any such sale or transfer, that the holder of the Public Warrants would have received
if such holder had exercised their Public Warrants immediately prior to such event. However, if such holders were entitled to exercise
a right of election as to the kind or amount of securities, cash or other assets receivable upon such consolidation or merger, then the
kind and amount of securities, cash or other assets for which each Public Warrant will become exercisable will be deemed to be the weighted
average of the kind and amount received per share by such holders in such consolidation or merger that affirmatively make such election.
If less than 70% of the consideration receivable by the holders of Common Stock in such a transaction is payable in the form of Common
Stock in the successor entity that is listed for trading on a national securities exchange or is quoted in an established over-the-counter
market, or is to be so listed for trading or quoted immediately following such event, and if the registered holder of the Public Warrant
properly exercises the Public Warrant within thirty days following public disclosure of such transaction pursuant to a Current Report
on Form 8-K, the warrant exercise price will be reduced as specified in the Warrant Agreement based on the Black-Scholes value (as defined
in the Warrant Agreement) of the Public Warrant. The purpose of such exercise price reduction is to provide additional value to holders
of the Public Warrants when an extraordinary transaction occurs during the exercise period of the Public Warrants pursuant to which the
holders of the Public Warrants otherwise do not receive the full potential value of the Public Warrants.
171
The Public Warrant may be
exercised upon surrender of the warrant certificate on or prior to the expiration date at the offices of the warrant agent, with the exercise
form on the reverse side of the warrant certificate completed and executed as indicated, accompanied by full payment of the exercise price
(or on a cashless basis, if applicable), by certified or official bank check payable to us, for the number of Public Warrants being exercised.
The warrant holders do not have the rights or privileges of holders of Common Stock and any voting rights until they exercise their Public
Warrants and receive shares of Common Stock. After the issuance of shares of Common Stock upon exercise of the Public Warrants, each holder
will be entitled to one vote for each share held of record on all matters to be voted on by stockholders.
Public Warrants may be exercised
only for a whole number of shares of Common Stock. No fractional shares will be issued upon exercise of the Public Warrants. If, upon
exercise of the Public Warrants, a holder would be entitled to receive a fractional interest in a share, we will, upon exercise, round
down to the nearest whole number of shares of Common Stock to be issued to the warrant holder. As a result, warrant holders not purchasing
an even number of Public Warrants must sell any odd number of Public Warrants in order to obtain full value from the fractional interest
that will not be issued.
The Public Warrants were
issued in registered form under the Warrant Agreement. You should review a copy of the Warrant Agreement, which is filed as an exhibit
to our registration statement on Form S-4 filed on June 7, 2023, for a complete description of the terms and conditions applicable to
the Public Warrants. The Warrant Agreement provides that the terms of the Public Warrants may be amended without the consent of any holder
to cure any ambiguity or correct any defective provision, but requires the approval by the holders of a majority of the then-outstanding
Public Warrants to make any changes that adversely affect the interests of the registered holders of Public Warrants.
Private Placement Warrants
The Private Placement Warrants
(including the Common Stock issuable upon exercise of the Private Placement Warrants) are not transferable, assignable or salable until
30 days after the completion of our business combination (subject to limited exceptions). In addition, for as long as Private Placement
Warrants are held by Cantor and/or its designees or affiliates, such Private Placement Warrants will be subject to a lock-up in compliance
with FINRA Rule 5110(e) and may not be exercised after five years from the commencement of sales of our Initial Public Offering in accordance
with FINRA Rule 5110(g)(8)(A). The Private Placement Warrants will be redeemable by us and exercisable by the holders on the same basis
as the Public Warrants.
Conversion Warrants
Exercise Price
. The
Conversion Warrants are initially exercisable for cash at an exercise price equal to $10.00. The exercise price is subject to adjustment
for stock splits, combinations and similar events, and, in the event of stock dividends and splits, the number of shares of Common Stock
issuable upon the exercise of the Conversion Warrant will also be adjusted so that the aggregate exercise price shall be the same immediately
before and immediately after any such adjustment.
Exercise Period
. The
Conversion Warrants will expire five years after their issuance, or November 14, 2024.
Automatic Conversion
.
The Conversion Warrants will automatically convert at the end of the exercise period if the fair market value (as determined in the Conversion
Warrants) of a share of Common Stock underlying the Conversion Warrants is greater than the exercise price in effect on such date.
172
Common Warrants
Series A Warrants
Exercise Price
. The
Series A Warrants were initially exercisable for cash at an exercise price equal to the greater of (x) $9.20 (as adjusted for stock splits,
stock dividends, stock combinations, recapitalizations and similar events) and (y) the closing price of the Common Stock on the trading
day immediately prior to the Subscription Date (as defined in the Series A Warrant). As of the date of this prospectus, the current exercise
price of the Series A Warrants is $1.39. The exercise price is subject to adjustment for stock splits, combinations and similar events,
and, in the event of stock dividends and splits, the number of shares of Common Stock issuable upon the exercise of the Series A Warrant
will also be adjusted so that the aggregate exercise price shall be the same immediately before and immediately after any such adjustment.
April Exercise Price Adjustment.
The Series A Warrants were subject to an adjustment whereby, if the exercise price in effect as of the First Stockholder Approval Date
was greater than the lesser of (i) the closing price of the Common Stock immediately prior to such date and (ii) the quotient of (x) the
sum of each closing price of the Common Stock during the five trading day period ending, and including the trading day immediately prior
to the First Stockholder Approval Date, divided by (y) five, the Exercise Price shall automatically lower to such price as of the First
Stockholder Approval Date. As a result, in April 2024, the exercise price of the Series A Warrants was lowered to $1.39.
Exercise Period
. The
Series A Warrants became exercisable beginning six months after the consummation of the issuance date (the "Initial Exercisability
Date") and expire on the third anniversary of the Initial Exercisability Date. The Series A Warrants require "buy-in"
payments to be made by us for failure to deliver any shares of Common Stock issuable upon exercise.
Cashless Exercise
.
If at the time of exercise of the Series A Warrants, there is no effective registration statement registering the shares of the Common
Stock underlying the Series A Warrants, such warrants may be exercised on a cashless basis pursuant to their terms.
Purchase Rights; Participation
Rights
. If we issue options, convertible securities, warrants, shares, or similar securities to holders of Common Stock, each holder
of Series A Warrants has the right to acquire the same as if the holder had exercised its Series A Warrant. The holders of Series A Warrants
are entitled to receive any dividends paid or distributions made to our holders of Common Stock on an "as if converted" basis.
Fundamental Transactions
.
The Series A Warrants prohibit us from entering into specified fundamental transactions unless the successor entity assumes all of our
obligations under the Series A Warrants under a written agreement before the transaction is completed. Upon specified corporate events,
a holder of Series A Warrants will thereafter have the right to receive upon an exercise such shares, securities, cash, assets or any
other property whatsoever which the holder would have been entitled to receive upon the happening of the applicable corporate event had
the Series A Warrant been exercised immediately prior to the applicable corporate event. When there is a transaction involving specified
changes of control, a holder of Series A Warrants can request the Company to exchange the then unexercised portion of their Series A Warrants for consideration equal to the Black-Scholes
value thereof, which shall be settled, at the option of the Company in either (i) the form of rights convertible into the consideration
receivable by holders of the underlying shares of common stock, based upon the value of the shares of the successor entity over a specified
period or (ii) cash in an amount equal to the Black-Scholes value.
Series C Warrants
Except as set forth below,
the Series C Warrants have terms and provisions that are substantially the same as those of the Series A Warrants.
Exercise Price
. The
Series C Warrants will initially be exercisable for cash at an exercise price equal to $0.098. The exercise price is subject to adjustment
for stock splits, combinations and similar events, and, in the event of stock dividends and splits, the number of shares of Common Stock
issuable upon the exercise of the Series C Warrant will also be adjusted so that the aggregate exercise price shall be the same immediately
before and immediately after any such adjustment.
Preferred Warrants
Exercise Price
. The
Preferred Warrants will initially be exercisable for cash at an exercise price equal to $1,000 per share. The exercise price is subject
to adjustment for stock splits, combinations and similar events, and, in the event of stock dividends and splits, the number of shares
of Series A Preferred Stock issuable upon the exercise of the Preferred Warrant will also be adjusted so that the aggregate exercise price
shall be the same immediately before and immediately after any such adjustment.
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Exercise Period
. The
Preferred Warrants will expire on the first anniversary of the closing of the initial business combination, or February 14, 2025.
Forced Exercise
. We
have the right to require the holders of Preferred Warrants to exercise such Preferred Warrants into up to an aggregate number of shares
of Preferred Stock equal to the holder's pro rata amount of 2,000 Preferred Shares.
Fundamental Transactions
.
The Preferred Warrants prohibit us from entering into specified fundamental transactions unless the successor entity assumes all of our
obligations under the Preferred Warrants under a written agreement before the transaction is completed. Upon specified corporate events,
a holder of Preferred Warrants will thereafter have the right to receive upon an exercise such shares, securities, cash, assets or any
other property whatsoever which the holder would have been entitled to receive upon the happening of the applicable corporate event had
the Preferred Warrant been exercised immediately prior to the applicable corporate event.
Anti-Takeover Provisions
Section 203 of the Delaware General Corporation
Law
We are subject to Section
203 of the DGCL, which generally prohibits a publicly held Delaware corporation from engaging in any business combination with any interested
stockholder for a period of three years after the date that such stockholder became an interested stockholder, with the following exceptions:
●
before such date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;
●
upon completion of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction began, excluding for purposes of determining the voting stock outstanding, but not the outstanding voting stock owned by the interested stockholder, those shares owned (1) by persons who are directors and also officers and (2) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or
●
on or after such date, the business combination is approved by the board of directors and authorized at an annual or special meeting of the stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder.
In general, Section 203 defines a "business
combination" to include the following:
●
any merger or consolidation involving the corporation and the interested stockholder;
●
any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder;
●
subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;
●
any transaction involving the corporation that has the effect of increasing the proportionate share of the stock or any class or series of the corporation beneficially owned by the interested stockholder; or
174
●
the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits by or through the corporation.
●
in general, Section 203 defines an "interested stockholder" as an entity or person who, together with the person's affiliates and associates, beneficially owns or, within three years prior to the time of determination of interested stockholder status, did own 15% or more of the outstanding voting stock of the corporation.
●
a Delaware corporation may "opt out" of these provisions with an express provision in its original certificate of incorporation or an express provision in its amended and restated certificate of incorporation or amended and restated bylaws resulting from a stockholders' amendment approved by at least a majority of the outstanding voting shares. We have not opted out of these provisions. As a result, mergers or other takeover or change in control attempts of we may be discouraged or prevented.
In general, Section 203 defines
an "interested stockholder" as an entity or person who, together with the person's affiliates and associates, beneficially
owns or, within three years prior to the time of determination of interested stockholder status, did own 15% or more of the outstanding
voting stock of the corporation.
A Delaware corporation may
"opt out" of these provisions with an express provision in its original certificate of incorporation or an express provision
in its amended and restated certificate of incorporation or amended and restated bylaws resulting from a stockholders' amendment
approved by at least a majority of the outstanding voting shares. We have not opted out of these provisions. As a result, mergers or other
takeover or change in control attempts of us may be discouraged or prevented.
Among other things, the Charter
and Bylaws:
●
permit the Board to issue up to 10,000,000 shares of Preferred Stock, with any rights, preferences and privileges as they may designate, including the right to approve an acquisition or other change of control;
●
provide that the authorized number of directors may be fixed only by resolution of the Board;
●
provide that the Board will be classified into three classes of directors;
●
provide that, subject to the rights of any series of Preferred Stock to elect directors, directors may only be removed for cause, which removal may be effected, subject to any limitation imposed by law, by the holders of at least 66 2/3% of the voting power of all of our then-outstanding shares of the capital stock entitled to vote generally at an election of directors, voting together as a single class;
●
provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum;
●
require that any action to be taken by our stockholders must be effected at a duly called annual or special meeting of stockholders and not be taken by written consent or electronic transmission;
●
provide that our stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide advance notice in writing, and also specify requirements as to the form and content of a stockholder's notice;
●
provide that special meetings of our stockholders may be called only by the chairperson of the Board, our chief executive officer or by the Board pursuant to a resolution adopted by a majority of the total number of authorized directors; and
●
not provide for cumulative voting rights, therefore allowing the holders of a majority of the shares of Common Stock entitled to vote in any election of directors to elect all of the directors standing for election if they should so choose.
The amendment of a number
of these provisions would require approval by the holders of at least 66 2/3% of the voting power of all of our then-outstanding capital
stock entitled to vote generally in the election of directors, voting together as a single class.
175
The combination of these
provisions will make it more difficult for our existing stockholders to replace the Board, as well as for another party to obtain control
of us by replacing the Board. Since the Board has the power to retain and discharge our officers, these provisions could also make it
more difficult for existing stockholders or another party to effect a change in management. In addition, the authorization of undesignated
preferred stock makes it possible for the Board to issue preferred stock with voting or other rights or preferences that could impede
the success of any attempt to change our control.
These provisions are intended
to enhance the likelihood of continued stability in the composition of our Board and our policies and to discourage coercive takeover
practices and inadequate takeover bids. These provisions are also designed to reduce our vulnerability to hostile takeovers and to discourage
certain tactics that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender
offers for our shares and may have the effect of delaying changes in our control or management. As a consequence, these provisions may
also inhibit fluctuations in the market price of our stock.
Choice of Forum
The Charter and Bylaws provide
that, unless we consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (or, if the
Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state court located within the State of Delaware or,
if all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware) and any appellate
court therefrom will be the sole and exclusive forum for the following claims or causes of action under Delaware statutory or common law:
(A) any derivative claim or cause of action brought on our behalf, (B) any claim or cause of action for breach of a fiduciary duty owed
by any of our then current or former directors, officers, or other employees to us or our stockholders, (C) any claim or cause of action
against it or any of our current or former directors, officers or other employees arising out of or pursuant to any provision of the DGCL,
the Charter or the Bylaws (as each may be amended from time to time), (D) any claim or cause of action seeking to interpret, apply, enforce
or determine the validity of the Charter or Bylaws (as each may be amended from time to time, including any right, obligation, or remedy
thereunder) (E) any claim or cause of action as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware
or (F) any claim or cause of action against us or any of our then current or former directors, officers or other employees, governed by
the internal-affairs doctrine or otherwise related to our internal affairs, in each case to the fullest extent permitted by law and subject
to the court having personal jurisdiction over the indispensable parties named as defendants. These provisions do not apply to claims
or causes of action brought to enforce a liability or duty created by the Securities Act, the Exchange Act or any other claim where the
U.S. federal courts have exclusive jurisdiction. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal
and state courts over all such Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such
claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different
courts, among other considerations, the Charter and Bylaws will further provide that, unless we consent in writing to the selection of
an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States will be the exclusive forum
for the resolution of any action or proceeding asserting a cause of action arising under the Securities Act, including all causes of action
asserted against any defendant named in such complaint. For the avoidance of doubt, this provision is intended to benefit and may be enforced
by our officers and directors, the underwriters engaged in respect to any offering giving rise to such complaint giving rise to such complaint,
any other professional entity whose profession gives authority to a statement made by that person or entity and who has prepared or certified
any part of the documents underlying the Business Combination. While the Delaware courts have determined that such choice of forum provisions
are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum
provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of
the Charter and Bylaws.
These exclusive forum provisions
may limit a stockholder's ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors,
officers, or other employees and may discourage these types of lawsuits, or could result in increased costs for a stockholder to bring
a claim, particularly if they do not reside in or near Delaware, both of which may discourage lawsuits against us or our directors, officers
and employees.
176
Furthermore, the enforceability
of similar choice of forum provisions in other companies' certificates of incorporation or bylaws has been challenged in legal proceedings,
and it is possible that a court could find these types of provisions to be inapplicable or unenforceable.
Exchange Listing
Our Common Stock and Public
Warrants are listed on the Nasdaq Capital Market under the symbol "CERO" and "CEROW," respectively.
Transfer Agent and Registrar
The transfer agent and registrar
for our securities is Continental Stock Transfer & Trust Company. The transfer agent and registrar's address is One State Street
Plaza, 30
th
Floor, New York, New York 10004, and its telephone number is (800) 509-5586.
177
DESCRIPTION OF SECURITIES WE ARE OFFERING
We are offering up to [____] shares of our Common
Stock or Pre-Funded Warrants to purchase up to [_____] shares of our Common Stock together with Offered Common Warrants to purchase up
to [_____] shares of Common Stock. For each Pre-Funded Warrant we sell, the number of shares of Common Stock we are offering will be decreased
on a one-for-one basis. Each share of Common Stock or Pre-Funded Warrant is being sold together with an Offered Common Warrant to purchase
one share of Common Stock. The shares of Common Stock or Pre-Funded Warrants and accompanying Offered Common Warrants will be issued separately
and will be immediately separable upon issuance but must be purchased together in this offering. We are also registering the shares of
Common Stock issuable from time to time upon exercise of the Offered Common Warrants and Pre-Funded Warrants offered hereby.
Common Stock
The material terms and provisions of our Common
Stock are described under the caption "Description of Securities" in this prospectus and are incorporated herein by reference.
Pre-Funded Warrants
The following summary of certain terms and provisions
of the Pre-Funded Warrants that are being offered hereby is not complete and is subject to, and qualified in its entirety by, the provisions
of the Pre-Funded Warrant, the form of which is filed as an exhibit to the registration statement of which this prospectus forms a part.
Prospective investors should carefully review the terms and provisions of the form of Pre-Funded Warrant for a complete description of
the terms and conditions of the Pre-Funded Warrants.
Duration and Exercise Price
Each Pre-Funded Warrant offered hereby will have
an initial exercise price per share equal to $0.001. The Pre-Funded Warrants will be immediately exercisable and may be exercised at any
time until the Pre-Funded Warrants are exercised in full. The exercise price and number of shares of Common Stock issuable upon exercise
is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations or similar events affecting our Common
Stock and the exercise price.
Exercisability
Each Pre-Funded Warrant may be exercised at any
time following the date of issuance and from time to time thereafter until the Pre-Funded Warrants are exercised in full. The Pre-Funded
Warrants will be exercisable in whole or in part by delivering to the Company a completed instruction form for exercise and complying
with the requirements for exercise set forth in the Pre-Funded Warrant. Payment of the exercise price may be made in cash in which case
the holder would receive upon such exercise the net number of shares of Common Stock determined according to the formula set forth in
the Pre-Funded Warrant.
Exercise Limitation
In general, a holder will not have the right to
exercise any portion of a Pre-Funded Warrant if the holder (together with its Attribution Parties (as defined in the Pre-Funded Warrant))
would beneficially own in excess of 4.99% or 9.99%, at the election of the holder, of the number of shares of our Common Stock outstanding
immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Pre-Funded
Warrant. However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99% upon notice to us,
provided, that any increase in this limitation will not be effective until 61 days after such notice from the holder to us and such increase
or decrease will apply only to the holder providing such notice.
Transferability
Subject to applicable laws, a Pre-Funded Warrant
may be transferred at the option of the holder upon surrender of the Pre-Funded Warrant to us together with the appropriate instruments
of transfer.
178
Fractional Shares
No fractional shares of Common Stock will be issued
upon the exercise of the Pre-Funded Warrants. Rather, the number of shares of Common Stock to be issued will, at our election, either
be rounded up to the nearest whole number or we will pay a cash adjustment in respect of such final fraction in an amount equal to such
fraction multiplied by the exercise price.
Trading Market
There is no trading market available for the Pre-Funded
Warrants on any securities exchange or nationally recognized trading system.
Fundamental Transactions
If a "Fundamental Transaction" occurs
while the Pre-Funded Warrants are outstanding (which includes, but is not limited to, merger transactions or a sale of substantially all
of the company's assets), then if holders of the Common Stock are given any choice as to the securities, cash or property to be
received in a Fundamental Transaction (as defined in the Pre-Funded Warrant), then the holder will be given the same choice as to the
consideration it receives upon any exercise of either the Pre-Funded Warrants following such Fundamental Transaction.
Right as a Stockholder
Except as otherwise provided in the Pre-Funded
Warrants or by virtue of such holder's ownership of shares of our Common Stock, the holders of the Pre-Funded Warrants do not have
the rights or privileges of holders of our Common Stock, including any voting rights, until they exercise their Pre-Funded Warrants.
Offered Common Warrants
The following summary of certain terms and provisions
of the Offered Common Warrants that are being offered hereby is not complete and is subject to, and qualified in its entirety by, the
provisions of the Offered Common Warrant, the form of which is filed as an exhibit to the registration statement of which this prospectus
forms a part. Prospective investors should carefully review the terms and provisions of the form of Offered Common Warrant for a complete
description of the terms and conditions of the Offered Common Warrants.
We are offering Offered Common Warrants to purchase
up to an aggregate of [______] shares of our Common Stock.
Each Offered Common Warrant issued in this offering
represents the right to purchase one share of Common Stock at an initial exercise price of $[__] per share. Each Offered Common Warrant
may be exercised at the election of the holder immediately upon issuance and from time to time thereafter through and including the fifth
anniversary of the initial exercise date.
The Offered Common Warrants will be exercisable
in whole or in part by delivering to the Company a completed instruction form for exercise and complying with the requirements for exercise
set forth in the Offered Common Warrant. Payment of the exercise price may be made in cash, in which case the holder would receive upon
such exercise the net number of shares of Common Stock determined according to the formula set forth in the Offered Common Warrants.
No Fractional Shares
No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of the Offered Common Warrants. As to any fraction of a share which the holder would otherwise
be entitled to purchase upon such exercise, the number of shares of Common Stock to be issued shall be rounded up to the nearest whole
number.
179
Exercise Limitation
In general, a holder will not have the right to
exercise any portion of an Offered Common Warrant if the holder (together with its Attribution Parties (as defined in the Offered Common
Warrant)) would beneficially own in excess of 4.99% or 9.99%, at the election of the holder, of the number of shares of our Common Stock
outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of
the Offered Common Warrant. However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99%
upon notice to us, provided that any increase in this limitation will not be effective until 61 days after such notice from the holder
to us and such increase or decrease will apply only to the holder providing such notice.
Adjustment for Stock Splits
The exercise price and the number of shares of
Common Stock purchasable upon the exercise of the Offered Common Warrants are subject to adjustment upon the occurrence of specific events,
including sales of additional shares of Common Stock, stock dividends, stock splits, and combinations of our Common Stock.
Dividends or Distributions
If we declare or make any dividend or other distribution
of our assets (or rights to acquire its assets) to holders of shares of our Common Stock, by way of return of capital or otherwise (including,
without limitation, any distribution of cash, stock or other securities, property, options, evidence of indebtedness or any other assets
by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) at any
time after the issuance of the Offered Common Warrants, then, in each such case, the holders of the Offered Common Warrants shall be entitled
to participate in such distribution to the same extent that the holders would have participated therein if the holders had held the number
of shares of Common Stock acquirable upon complete exercise of the Offered Common Warrants.
Purchase Rights
If we grant, issue or sell any shares of our Common
Stock or securities exercisable for, exchangeable for or convertible into our Common Stock, or rights to purchase stock, common warrants,
securities or other property pro rata to the record holders of any class of shares of our Common Stock, referred to as Purchase Rights,
then each holder of the Offered Common Warrants will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which the holder could have acquired if the holder had held the number of shares of Common Stock acquirable upon complete
exercise of the Offered Common Warrants immediately before the record date, or, if no such record is taken, the date as of which the record
holders of shares of Common Stock are to be determined, for the grant, issue or sale of such Purchase Rights.
Fundamental Transactions
In the event of a fundamental transaction, as
described in the Offered Common Warrants and generally including any reorganization, recapitalization or reclassification of our Common
Stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with
or into another person, the consummation of a business combination with another person or group of persons whereby such other person or
group acquires greater than 50.1% of the voting power of the outstanding Common Stock and preferred stock, the holders of the Offered
Common Warrants will be entitled to receive upon exercise of the Offered Common Warrants the kind and amount of securities, cash or other
property that the holders would have received had they exercised the Offered Common Warrants immediately prior to such fundamental transaction.
Notwithstanding anything to the contrary, in the event of a Fundamental Transaction, the holder may require the Company or its successor
to repurchase the Offered Common Warrants for its Black-Scholes Value (as defined in the Offered Common Warrants) in cash. This right
can be exercised concurrently with, or within 30 days following, the consummation or public announcement of the transaction. If the Fundamental
Transaction occurs outside the Company's control, such as in a hostile takeover or an unapproved transaction, the holder is entitled
to receive consideration equivalent in type and proportion to that offered to common stockholders, also calculated based on the Black-Scholes
model. Additionally, if no consideration is offered to the Company's stockholders in the transaction, the holder is deemed to receive
common stock of the successor entity, preserving the Offered Common Warrants value.
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Transferability
Subject to applicable laws, the Offered Common
Warrants may be offered for sale, sold, transferred or assigned. There is currently no trading market for the Offered Common Warrants
and a trading market is not expected to develop.
Rights as a Stockholder
Except as otherwise provided in the Offered Common
Warrants or by virtue of a holder's ownership of shares of our Common Stock, the holders of the Offered Common Warrants do not have
the rights or privileges of holders of our Common Stock, including any voting rights, unless and until they exercise their Offered Common
Warrants.
Amendments
The Offered Common Warrants may be amended with
the written consent of the holder of such Offered Common Warrant and us.
Listing
There is no established public trading market
for the Offered Common Warrants, and we do not expect a market to develop. In addition, we do not intend to apply for listing of the Offered
Common Warrants on any national securities exchange.
181
SECURITIES ACT RESTRICTIONS ON RESALE OF OUR
SECURITIES
Rule 144
Pursuant to Rule 144 under
the Securities Act ("Rule 144"), a person who has beneficially owned restricted shares of our Common Stock or restricted Warrants
for at least six months would be entitled to sell their securities provided that (i) such person is not deemed to have been one of our
affiliates at the time of, or at any time during the three months preceding, a sale and (ii) we are subject to the Exchange Act periodic
reporting requirements for at least three months before the sale and has filed all required reports under Section 13 or 15(d) of the Exchange
Act during the 12 months (or such shorter period as we were required to file reports) preceding the sale.
Persons who have beneficially
owned restricted shares of our Common Stock or restricted Warrants for at least six months but who are our affiliates at the time of,
or at any time during the three months preceding, a sale, would be subject to additional restrictions, by which such person would be entitled
to sell within any three-month period only a number of securities that does not exceed the greater of:
●
1% of the total number of shares of our Common Stock or Warrants then outstanding, as applicable; or
●
the average weekly reported trading volume of our Common Stock or our Warrants, as applicable, during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.
Sales by our affiliates under
Rule 144 are also limited by manner of sale provisions and notice requirements and to the availability of current public information about
us.
Restrictions on the Use of Rule 144 by Shell
Companies or Former Shell Companies
Rule 144 is not available
for the resale of securities initially issued by shell companies (other than business-combination related shell companies) or issuers
that have been at any time previously a shell company. However, Rule 144 also includes an important exception to this prohibition if the
following conditions are met:
●
the issuer of the securities that was formerly a shell company has ceased to be a shell company;
●
the issuer of the securities is subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act;
●
the issuer of the securities has filed all Exchange Act reports and material required to be filed, as applicable, during the preceding 12 months (or such shorter period that the issuer was required to file such reports and materials) other than Form 8-K reports; and
●
at least one year has elapsed from the time that the issuer filed current Form 10-type information with the SEC reflecting its status as an entity that is not a shell company.
We are no longer a shell
company and, as a result, once the conditions set forth in the exceptions listed above are satisfied, Rule 144 will become available for
the resale of shares of Common Stock.
Registration Rights
Each of the Investor Rights
Agreement, the Keystone Registration Rights Agreements, the Arena Purchase Agreement, the Fee Modification Agreements and the Liquidated
Damages Modification Agreement provides for certain registration rights. For additional information, see the subsections entitled "
Description
of Securities—Registration Rights
."
182
PLAN OF DISTRIBUTION
We have engaged JonesTrading Institutional Services
LLC, or the placement agent, to act as our exclusive placement agent to solicit offers to purchase the shares of our Common
Stock, Pre-Funded Warrants and Offered Common Warrants offered by this prospectus pursuant to a placement agency agreement.
The placement agent is not purchasing or selling any such securities, nor is it required to arrange for the purchase and sale of any specific
number or dollar amount of such securities, other than to use their "reasonable best efforts" to arrange for the sale of such
securities by us. Therefore, we may not sell all of the shares of Common Stock, Pre-Funded Warrants and Common Warrants being
offered. The terms of this offering were subject to market conditions and negotiations between us, the placement agent and prospective
investors. The placement agent will have no authority to bind us. This is a best efforts offering and there is no minimum offering amount
required as a condition to the closing of this offering. The placement agent may retain sub-agents and selected dealers in connection
with this offering. Investors purchasing securities offered hereby will have the option to execute a securities purchase agreement with
us. In addition to rights and remedies available to all purchasers in this offering under federal securities and state law, the purchasers
who enter into a securities purchase agreement will also be able to bring claims of breach of contract against us.
The nature of the representations, warranties
and covenants in the placement agency agreement shall include:
●
standard issuer representations and warranties on matters
such as organization, qualification, authorization, no conflict, no governmental filings required, current in SEC filings, no litigation,
labor or other compliance issues, environmental, intellectual property and title matters and compliance with various laws such as the
Foreign Corrupt Practices Act; and
●
covenants regarding matters such as no integration with other
offerings, filing of a Current Report on Form 8-K to disclose the consummation of the offering and entry in securities purchase agreements
and the placement agency agreement, no shareholder rights plans, no material nonpublic information, use of proceeds, indemnification,
reservation and listing of common stock.
Delivery of the shares of Common Stock, Pre-Funded
Warrants and Offered Common Warrants offered hereby is expected to occur on or about      , 2024, subject
to satisfaction of certain customary closing conditions.
We have agreed to pay the placement agent an aggregate
fee equal to [7]% of the gross proceeds received in the offering. In addition, we have agreed to reimburse the placement agent for its
legal fees and expenses and other out-of-pocket expenses in an amount up to $100,000 and clearing expenses of $ [__].
We estimate the total expenses of this offering
paid or payable by us, exclusive of the placement agent's cash fee of 7% of the gross proceeds and expenses, will be approximately
$ [___]. After deducting the fees due to the placement agent and our estimated expenses in connection with this offering, we expect the
net proceeds from this offering will be approximately $[____] million.
The following table shows the per share and total
cash fees we will pay to the placement agent in connection with the sale of the Common Stock, Pre-Funded Warrants, Offered Common
Warrants and shares of Common Stock underlying the Pre-Funded Warrants and Offered Common Warrants pursuant to this prospectus.
Per Share
and Offered Common
Warrant
Per Pre-Funded
Warrant and Offered
Common Warrant
Total
Public offering price
$
[__]
$
[__]
$
[__]
Placement agent fees
$
[__]
$
[__]
$
[__]
Proceeds, before expenses, to us
$
[__]
$
[__]
$
[__]
183
Indemnification
We have agreed to indemnify the placement agent
against certain liabilities, including liabilities under the Securities Act and liabilities arising from breaches of representations and
warranties contained in our engagement letter with the placement agent. We have also agreed to contribute to payments the placement agent
may be required to make in respect of such liabilities.
Lock-up Agreements
Each of our executive officers and directors have
agreed with the placement agent to be subject to a lock-up period of [___] days following the date of closing of the offering pursuant
to this prospectus. This means that, during the applicable lock-up period, we and such persons may not offer for sale, contract to sell,
sell, distribute, grant any option, right or warrant to purchase, pledge, hypothecate or otherwise dispose of, directly or indirectly,
any of our shares of Common Stock or any securities convertible into, or exercisable or exchangeable for, shares of Common Stock, subject
to customary exceptions. The placement agent may waive the terms of these lock-up agreements in its sole discretion and without notice.
The ability to pursue a claim for breach of contract
is material to larger purchasers in this offering as a means to enforce the following covenants uniquely available to them under the securities
purchase agreement: (i) a covenant to not enter into variable rate financings for a period of [____] following the closing of the offering,
subject to an exception; and (ii) a covenant to not enter into any equity financings for [____] from closing of the offering, subject
to certain exceptions.
Other Relationships
From time to time, the placement agent may provide
in the future various advisory, investment and commercial banking and other services to us in the ordinary course of business, for which
they have received and may continue to receive customary fees and commissions.
Regulation M Compliance
The placement agent may be deemed to be an underwriter
within the meaning of Section 2(a)(11) of the Securities Act, and any commissions received by it and any profit realized on the sale of
our securities offered hereby by it while acting as principal might be deemed to be underwriting discounts or commissions under the Securities
Act. The placement agent will be required to comply with the requirements of the Securities Act and the Exchange Act, including,
without limitation, Rule 10b-5 and Regulation M under the Exchange Act. These rules and regulations may limit the timing of purchases
and sales of our securities by the placement agent. Under these rules and regulations, the placement agent may not (i) engage in
any stabilization activity in connection with our securities; and (ii) bid for or purchase any of our securities or attempt to induce
any person to purchase any of our securities, other than as permitted under the Exchange Act, until they have completed their participation
in the distribution.
Determination of Offering Price
The actual offering price of the securities we
are offering were negotiated between us, the placement agent and the investors in the offering based on the trading of our Common Stock
prior to the offering, among other things. Other factors considered in determining the public offering price of the securities we are
offering, as well as the exercise price of the Offered Common Warrants and Pre-Funded Warrants that we are offering, include our history
and prospects, the stage of development of our business, our business plans for the future and the extent to which they have been implemented,
an assessment of our management, the general conditions of the securities markets at the time of the offering and such other factors as
were deemed relevant.
184
Electronic Distribution
A prospectus in electronic format may be made
available on a website maintained by the placement agent. In connection with the offering, the placement agent or selected dealers may
distribute prospectuses electronically. No forms of electronic prospectus other than prospectuses that are printable as Adobe® PDF
will be used in connection with this offering.
Other than the prospectus in electronic format,
the information on the placement agent's website and any information contained in any other website maintained by the placement
agent is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or
endorsed by us or the placement agent in its capacity as placement agent and should not be relied upon by investors.
Certain Relationships
The placement agent and its affiliates have provided
and may in the future provide, from time to time, investment banking and financial advisory services to us in the ordinary course of business,
for which they may receive customary fees and commissions.
Trading Market
Our Common Stock is listed on the Nasdaq Global
Market under the symbol "CERO." There is no established public trading market for the Pre-Funded Warrants or the
Offered Common Warrants to be sold in this offering, and we do not expect a market for the Pre-Funded Warrants or the Offered Common Warrants
to develop. In addition, we do not intend to apply for listing of the Pre-Funded Warrants or Offered Common Warrants on any national securities
exchange.
185
LEGAL MATTERS
Goodwin Procter LLP has passed
upon the validity of the shares of our Common Stock, Pre-Funded Warrants and Offered Common Warrants offered by this prospectus and certain
other legal matters related to this prospectus. Certain legal matters will be passed upon for the placement agent by Ellenoff Grossman
& Schole LLP.
EXPERTS
The financial statements
of Phoenix Biotech Acquisition Corp. as of December 31, 2023 and 2022, and each of the years in the two-year period ended December 31,
2023, included in this prospectus have been audited by Citrin Cooperman & Company, LLP, an independent registered public accounting
firm, as stated in their report, which contains an explanatory paragraph related to the substantial doubt about PBAX's ability to
continue as a going concern. Such financial statements are included in reliance upon the report of such firm as experts in accounting
and auditing.
The financial statements
of CERo Therapeutics, Inc. as of December 31, 2023 and 2022, and for each of the two years in the period ended December 31, 2023, included
in this prospectus have been audited by Wolf & Company, P.C., an independent registered public accounting firm, as stated in their
report. Such financial statements are included in reliance upon such report given on the authority of such firm as experts in accounting
and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration
statement on Form S-1, including exhibits, under the Securities Act with respect to the shares of our Common Stock offered by this prospectus.
This prospectus constitutes only a part of the registration statement. Some items are contained in exhibits to the registration statement
as permitted by the rules and regulations of the SEC. For further information with respect to us and our securities, we refer you to the
registration statement, including the exhibits filed as a part of the registration statement. Statements contained in this prospectus
concerning the contents of any contract or document referred to are not necessarily complete. If a contract or document has been filed
as an exhibit to the registration statement, please see the copy of the contract or document that has been filed. Each statement in this
prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit.
In addition, we file annual,
quarterly and current reports, proxy statements and other information with the SEC. Our SEC filings are available to the public on a website
maintained by the SEC located at
www.sec.gov.
We also maintain a website at
www.cero.bio/investors.
Through our website,
we make available, free of charge, annual, quarterly and current reports, proxy statements and other information as soon as reasonably
practicable after they are electronically filed with, or furnished to, the SEC. The information contained on, or that may be accessed
through, our website is not part of, and is not incorporated into, this prospectus. Information contained on our website is not a part
of or incorporated by reference into this prospectus and the inclusion of our website and investor relations website addresses in this
prospectus is an inactive textual reference only.
186
INDEX TO FINANCIAL STATEMENTS
CERO THERAPEUTICS HOLDINGS, INC.
Unaudited Financial Statements as of September 30, 2024 and December
31, 2023
Condensed
    Consolidated Balance Sheets as of September 30, 2024 (Successor) and December 31, 2023 (Predecessor)
F-2
Condensed
    Consolidated Statement of Operations for the Three Months Ended September 30, 2024 (Successor), Periods from February 14, 2024 through
    September 30, 2024 (Successor), January 1, 2024 through February 13, 2024 (Predecessor) and for the Three and Nine Months Ended September
    30, 2023 (Predecessor)
F-3
Condensed
    Consolidated Statements of Convertible Preferred Stock and Stockholders' Deficit for the three months ended September 30, 2024
    (Successor), Periods from February 14, 2024 through September 30, 2024 (Successor), January 1, 2024 through February 13, 2024 (Predecessor)
    and for the Three and Nine Months Ended September 30, 2023 (Predecessor)
F-4
Condensed
    Consolidated Statements of Cash Flows for the Period from February 14, 2024 through September 30, 2024 (Successor), January 1, 2024
    through February 13, 2024 (Predecessor) and for the Nine Months Ended September 30, 2023 (Predecessor)
F-6
Notes
    to Condensed Consolidated Financial Statements (Unaudited)
F-7
PHEONIX BIOTECH ACQUISITION CORP.
Audited Financial Statements as of and for the years ended December
31, 2023 and 2022
Report of Independent Registered Public Accounting Firm (PCAOB Auditor ID: 02468)
F-26
Balance Sheets
F-27
Statements of Operations
F-28
Statements of Changes in Stockholders' Deficit
F-29
Statements of Cash Flows
F-30
Notes to Financial Statements
F-31
CERO THERAPEUTICS, INC.
Audited Financial Statements as of and for the years ended December
31, 2023 and 2022
Report of Independent Registered Public Accounting Firm (PCAOB Auditor ID: 392)
F-50
Balance Sheets
F-51
Statements of Operations
F-52
Statement of Convertible Preferred Stock and Stockholders' Deficit
F-53
Statements of Cash Flows
F-54
Notes to Financial Statements
F-55
F-
1
CERO THERAPEUTICS HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30,
2024
(Successor)
December 31,
2023
(Predecessor)
(unaudited)
ASSETS
Cash, restricted cash, and cash equivalents
$
3,380,204
$
1,601,255
Prepaid expenses and other current assets
334,279
368,780
Total current assets
3,714,483
1,970,035
Deferred offering costs
500,000
-
Operating lease right-of-use assets
1,652,614
2,189,565
Property and equipment, net
624,900
966,702
Total assets
$
6,491,997
$
5,126,302
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
Accounts payable
$
6,667,073
$
1,671,745
Accrued liabilities
1,692,527
144,633
Common stock subscription deposit
-
1,875
Operating lease liability
931,023
769,092
Short-term notes payable, net
102,274
599,692
Earnout liability
30,000
-
Common stock warrant liability
-
320,117
Total current liabilities
9,422,897
3,507,154
Operating lease liability, net of current portion
771,525
1,575,499
Total liabilities
10,194,422
5,082,653
Commitments and contingencies
Convertible preferred stock, $
0.0001
par value per share, issuable in series:
Series Seed:
5,155,703
shares authorized, issued and outstanding at December 31, 2023; aggregate liquidation preference of $
4,154,981
at December 31, 2023
-
4,077,560
Series A:
24,614,402
shares authorized,
22,764,764
shares issued and outstanding at December 31, 2023; aggregate liquidation preference of $
39,999,967
at December 31, 2023
-
38,023,784
Total convertible preferred stock
-
42,101,344
Stockholders' deficit
Series C Convertible Preferred stock, $
0.0001
par value;
2,853
shares authorized, issued and outstanding at September 30, 2024
1,249,999
-
Series A Convertible Preferred stock, $
0.0001
par value;
12,580
shares authorized;
3,075
issued and outstanding at September 30, 2024
1,972,727
-
Series B Convertible Preferred stock, $
0.0001
par value;
626
shares authorized;
486
issued and outstanding at September 30, 2024
360,000
-
Class A common stock; $
0.0001
par value;
1
billion shares authorized;
147,542,572
shares issued and outstanding at September 30, 2024
14,753
-
Common stock, $
0.0001
par value,
45,350,000
shares authorized,
9,068,899
shares issued and outstanding at December 31, 2023
-
907
Additional paid-in capital
66,363,448
1,031,219
Stock subscription receivable
(
2,073,607
)
-
Accumulated deficit
(
71,589,745
)
(
43,089,821
)
Total stockholders' deficit
(
3,702,425
)
(
42,057,695
)
Total liabilities, convertible preferred stock and stockholders' deficit
$
6,491,997
$
5,126,302
See accompanying notes to the condensed consolidated
financial statements.
F-
2
CERO THERAPEUTICS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS
(Unaudited)
For the three months ended
September 30,
For the
period from
February 14,
2024
through
September 30,
For the
period from
January 1,
2024 through
February 13,
For the
nine months
ended
September 30,
2024
2023
2024
2024
2023
(Successor)
(Predecessor)
(Successor)
(Predecessor)
(Predecessor)
Operating expenses:
Research and development
$
1,774,210
$
1,277,558
$
5,392,569
$
764,192
$
4,270,472
General and administrative
2,628,028
258,013
7,812,843
132,941
2,283,404
Total operating expenses
4,402,238
1,535,571
13,205,412
897,133
6,553,876
Loss from operations
(
4,402,238
)
(
1,535,571
)
(
13,205,412
)
(
897,133
)
(
6,553,876
)
Other income
-
-
589,223
-
-
Other expense
(
147
)
-
(
630,922
)
-
-
Change in fair value of derivative liabilities
170,000
186,067
4,870,000
320,117
411,230
Interest income, net
4,418
157
(
26,993
)
4,805
118,251
Total other income
174,271
186,224
4,801,308
324,922
529,481
Net loss
$
(
4,227,967
)
$
(
1,349,347
)
$
(
8,404,104
)
$
(
572,211
)
$
(
6,024,395
)
Net loss per share:
Basic and diluted
$
(
0.09
)
$
(
0.15
)
$
(
0.28
)
$
(
0.06
)
$
(
0.67
)
Weighted average common shares outstanding:
Basic and diluted
49,675,773
9,068,899
30,000,286
9,068,899
9,058,608
See accompanying notes to the condensed consolidated
financial statements.
F-
3
CERO THERAPEUTICS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE
PREFERRED
STOCK AND STOCKHOLDERS' DEFICIT
(Unaudited)
Convertible Preferred Stock
Additional
Total
Series Seed
Series A
Common Stock
Paid-in
Accumulated
Stockholders'
Shares
Amount
Shares
Amount
Shares
Amount
Capital
Deficit
Deficit
Balance at December 31, 2022 (Predecessor)
5,155,703
$
4,077,560
22,764,764
$
38,023,784
9,044,733
$
904
$
928,560
$
(
35,800,244
)
$
(
34,870,780
)
Issuance of common stock from exercise of stock options
-
-
-
-
16,666
2
5,165
-
5,167
Stock based compensation expense
-
-
-
-
-
-
28,144
-
28,144
Net loss
-
-
-
-
-
-
-
(
2,438,330
)
(
2,438,330
)
Balance at March 31, 2023 (Predecessor)
5,155,703
$
4,077,560
22,764,764
$
38,023,784
9,061,399
$
906
$
961,869
$
(
38,238,574
)
$
(
37,275,799
)
Issuance of common stock from exercise of stock options
-
-
-
-
7,500
1
599
-
600
Stock based compensation expense
-
-
-
-
-
-
27,277
-
27,277
Net loss
-
-
-
-
-
-
-
(
2,236,718
)
(
2,236,718
)
Balance at June 30, 2023 (Predecessor)
5,155,703
$
4,077,560
22,764,764
$
38,023,784
9,068,899
$
907
$
989,745
$
(
40,475,292
)
$
(
39,484,640
)
Stock based compensation expense
-
-
-
-
-
-
23,498
-
23,498
Net loss
-
-
-
-
-
-
-
(
1,349,347
)
(
1,349,347
)
Balance at September 30, 2023 (Predecessor)
5,155,703
$
4,077,560
22,764,764
$
38,023,784
9,068,899
$
907
$
1,013,243
$
(
41,824,639
)
$
(
40,810,489
)
Convertible Preferred Stock
Additional
Total
Series Seed
Series A
Common Stock
Paid-in
Accumulated
Stockholders'
Shares
Amount
Shares
Amount
Shares
Amount
Capital
Deficit
Deficit
Balance at December 31, 2023 (Predecessor)
5,155,703
$
4,077,560
22,764,764
$
38,023,784
9,068,899
$
907
$
1,031,219
$
(
43,089,821
)
$
(
42,057,695
)
Stock based compensation expense
-
-
-
-
-
-
4,431
-
4,431
Net loss
-
-
-
-
-
-
-
(
572,211
)
(
572,211
)
Balance at February 13, 2024 (Predecessor)
5,155,703
$
4,077,560
22,764,764
$
38,023,784
9,068,899
$
907
$
1,035,650
$
(
43,662,032
)
$
(
42,625,475
)
F-
4
Convertible
    Preferred Stock
Series
    A
Additional
Stock
Series
    A
Series
    B
Series
    C
Common
    Stock
Paid-in
Subscriptions
Accumulated
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Capital
Receivable
Deficit
Total
Balance
    at February 14, 2024 (Successor)
10,039
$
8,937,852
-
$
-
-
$
-
14,531,847
$
1,452
$
53,898,434
$
(
2,000,000
)
$
(
63,185,641
)
$
(
2,347,903
)
Issuance
    of Series B shares sold to investors
-
-
626
500,000
-
-
-
-
-
(
500,000
)
-
-
Stock-based
    compensation
-
-
-
-
-
-
-
-
96,289
-
-
96,289
Net
    loss
-
-
-
-
-
-
-
-
-
-
(
1,727,483
)
(
1,727,483
)
Balance
    at March 31, 2024 (Successor)
10,039
$
8,937,852
626
$
500,000
-
-
14,531,847
$
1,452
$
53,994,723
$
(
2,500,000
)
$
(
64,913,124
)
$
(
3,979,097
)
Cash
    received for Series B stock subscription
-
-
-
-
-
-
-
-
-
500,000
-
500,000
Issuance
    of Series A shares for rounding purchases
3
1,875
-
-
-
-
-
-
128
-
-
2,003
Issuance
    of common stock for Arena Equity Line of Credit (ELOC)
-
-
-
-
-
-
345,566
35
499,965
-
-
500,000
Purchases of Common Stock under Keystone ELOC, net of issuance costs of $
933,345
-
-
-
-
-
-
7,860,351
786
1,699,327
(
194,971
)
-
1,505,142
Stock-based
    compensation
-
-
-
-
-
-
-
-
1,388,738
-
-
1,388,738
Net
    loss
-
-
-
-
-
-
-
-
-
-
(
2,448,654
)
(
2,448,654
)
Balance
    at June 30, 2024 (Successor)
10,042
$
8,939,727
626
$
500,000
-
-
22,737,764
$
2,273
$
57,582,881
$
(
2,194,971
)
$
(
67,361,778
)
$
(
2,531,868
)
Issuance
    of shares of Series A Preferred Stock on exercise of Series A Preferred Warrants
38
38,000
-
-
-
-
-
-
(
38,000
)
38,000
-
38,000
Issuance
    of common stock for Keystone ELOC
-
-
-
-
-
-
1,613,944
161
(
161
)
-
-
-
Purchases
    of shares of Common Stock under Keystone ELOC
-
-
-
-
-
-
12,997,921
1,300
1,704,431
194,971
-
1,900,702
Issuance
    of shares of Common Stock on conversion of Series A Preferred Stock
(
7,005
)
(
7,005,000
)
-
-
-
-
108,948,903
10,895
6,994,105
-
-
-
Issuance
    of shares of Common Stock on conversion of Series B Preferred Stock
-
-
(
140
)
(
140,000
)
-
-
1,244,040
124
139,876
-
-
-
Issuance of shares of Series C Preferred Stock sold to investors, net of issuance costs of $
434,428
-
-
-
-
2,853
1,249,999
-
-
(
434,428
)
(
111,607
)
-
703,964
Stock-based
    compensation
-
-
-
-
-
-
-
-
414,744
-
-
414,744
Net
    loss
-
-
-
-
-
-
-
-
-
-
(
4,227,967
)
(
4,227,967
)
Balance
    at September 30, 2024 (Successor)
3,075
$
1,972,727
486
$
360,000
2,853
$
1,249,999
147,542,572
$
14,753
$
66,363,448
$
(
2,073,607
)
$
(
71,589,745
)
$
(
3,702,425
)
See accompanying notes to the condensed
consolidated financial statements.
F-
5
CERO THERAPEUTICS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
For the
period from
February 14,
2024
through
September 30,
2024
(Successor)
For the
period from
January 1,
2024
through
February 13,
2024
(Predecessor)
For the
nine months
ended
September 30,
2023 (Predecessor)
Cash flows from operating activities:
Net loss
$
(
8,404,104
)
$
(
572,211
)
$
(
6,024,395
)
Adjustments to reconcile net loss to net cash used in operating activities:
Gain from settlement of liabilities with vendors
(
589,223
)
-
-
Depreciation expense
304,446
37,356
346,164
Stock-based compensation expense
1,899,771
4,431
78,919
Amortization of right-to-use operating lease asset
421,092
115,859
486,283
Amortization of debt discount
-
(
1,875
)
-
Non-cash interest expense
-
-
24,816
Gain on revaluation of derivative liabilities
(
4,870,000
)
(
320,117
)
(
411,232
)
Change in assets and liabilities:
Prepaid expenses and other current assets
(
146,618
)
142,687
41,689
Accounts payable
(
360,204
)
128,429
892,765
Accrued liabilities
1,526,821
(
50,370
)
229,361
Operating lease liability
(
520,454
)
(
121,589
)
(
493,587
)
Net cash used in operating activities
(
10,738,473
)
(
637,400
)
(
4,829,217
)
Cash flows from financing activities:
Proceeds from issuance of convertible notes
-
-
605,230
Issuance costs for convertible notes
-
-
(
41,194
)
Common stock subscription deposit
-
-
1,875
Cash proceeds from exercise of common stock options
-
-
5,767
Proceeds from share purchases under ELOC, net of issuance costs of $
1,133,333
4,139,190
-
-
Proceeds received from sale of shares of Series A Preferred Stock, net of $
1,096,300
in issuance costs
6,757,700
-
-
Proceeds received from sale of shares of Series B Preferred Stock
500,000
-
-
Proceeds received from sale of shares of Series C Preferred Stock,  net of $
434,428
in issuance costs
703,964
Payment of sponsor loans
(
19,715
)
-
-
Advances from shareholder
13,731
-
-
Payments for short term borrowings
(
300,240
)
-
Proceeds from short term borrowings
408,052
-
-
Proceeds from Preferred Warrant exercises
38,000
-
Net cash provided by financing activities
12,240,682
-
571,678
Net increase (decrease) in cash and cash equivalents
1,502,209
(
637,400
)
(
4,257,539
)
Cash, restricted cash and cash equivalents at beginning of period
1,877,995
1,601,255
6,819,564
Cash, restricted cash and cash equivalents at end of period
$
3,380,204
$
963,855
$
2,562,025
Supplemental cash flow information:
Cash and cash equivalents
$
3,305,448
$
884,099
$
2,482,269
Restricted cash
79,756
79,756
79,756
Cash, restricted cash and cash equivalents
$
3,380,204
$
963,855
$
2,562,025
Non-cash financing activities:
Issuance of common shares to Keystone Capital LLC for equity line of credit
$
500,000
$
-
$
-
Issuance of common shares to Arena Investors LP for equity line of credit
$
500,000
$
-
$
-
See accompanying notes to the condensed consolidated
financial statements.
F-
6
CERO THERAPEUTICS HOLDINGS, INC.
Notes to Condensed CONSOLIDATED Financial Statements
NOTE 1 –
NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Nature of Operations
– CERo Therapeutics
Holdings, Inc. F/K/A Phoenix Biotech Acquisition Corp. (NASDAQ: PBAX, "PBAX") was incorporated in Delaware on June 8, 2021.
PBAX was formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar
business combination with one or more businesses (a "business combination").
Business Combination Agreement
- On June
6, 2023, CERo Therapeutics, Inc. ("Predecessor"), which was incorporated in Delaware on September 23, 2016, and based in South
San Francisco, California, entered into a Business Combination Agreement and Plan of Reorganization (the "BCA") with PBCE
Merger Sub, Inc., a wholly-owned subsidiary of PBAX, and PBAX, with the surviving operating entity being named CERo Therapeutics Holdings,
Inc. ("Successor" or the "Company"), and such transaction, the "Merger".
The Company is focused on genetically engineering
human immune cells to fight cancer. The Predecessor focused on developing the CERo therapeutic platform and had not yet begun clinical
development or product commercialization. The Company's efforts will focus on continued product development, including clinical
development, to support regulatory approval to commercialize and subsequent product commercialization.
The BCA was amended on February 5, 2024 and again
on February 13, 2024. The Merger closed on February 14, 2024 (the "Closing"), at which time the following occurred:
1.
The outstanding shares of Predecessor's Preferred Stock were converted into
4,415,495
shares of Common Stock, par value $
0.0001
per share (the "Common Stock"), valued at $
21,635,926
.
2.
The outstanding shares of Predecessor's common stock were converted into
584,505
shares of Common Stock, valued at $
2,864,074
.
3.
Each holder of Predecessor's common stock received a pro rata portion of up to
1.2
million earnout shares of restricted Common Stock (the "BCA Earnout shares"), valued at $
5,880,000
, 1,000,000 of which are subject to vesting upon the achievement of certain stock price-based earnout targets and 200,000 of which are subject to vesting upon a change of control, respectively.
4.
Certain holders of Predecessor's common stock received a pro rata portion of
875,000
earnout shares of Common Stock (the "Reallocation shares"), valued at $
4.29
million, which became fully vested upon the Closing.
5.
Certain holders of Predecessor's common stock and convertible bridge notes received a pro rata portion of
1.0
million earnout shares (the "IND Earnout shares") of restricted Common Stock, valued at $
4,900,000
, which vested when the Company filed an investigational new drug ("IND") application with the Food and Drug Administration ("FDA").  The earning of these shares were accompanied by a forfeiture of
1,000,000
restricted shares of Common Stock held by the sponsor following receipt of an acknowledgement notice by the Sponsor.
6.
Each outstanding Predecessor option was converted into an option to purchase a number of shares of Common Stock, equal to the Predecessor's common stock underlying the option multiplied by the Exchange Ratio, at an exercise price per share equal to the Predecessor option exercise price divided by the Exchange Ratio.
7.
Each warrant to purchase the Predecessor's preferred stock was converted into a warrant to acquire a number of shares of Common Stock obtained by dividing the warrant as-if-exercised liquidation preference by $
10.00
, with the exercise price equal to the total Predecessor warrant exercise amount divided by the number of shares of Common Stock issuable upon exercise.
8.
The Predecessor's bridge notes automatically converted into shares of the Company's Series A Preferred Stock, par value $
0.0001
per share (the "Series A Preferred Stock"), at a conversion price equal to $
750
per share of Series A Preferred Stock.
F-
7
The Company issued, transferred from the Sponsor,
or reserved for issuance an aggregate of
8.4
million shares of Common Stock to the holders of Predecessor common stock and Predecessor
preferred stock or reserved for issuance upon exercise of rollover (from Predecessor to Successor) options and warrants as consideration
in the Merger.
Asset Acquisition Method of Accounting
-
The Merger was accounted for using the asset acquisition method in accordance with U.S. GAAP. Under this method of accounting, PBAX was
considered to be the accounting acquirer based on the terms of the Merger. Upon consummation of the Merger, the cash on hand resulted
in the equity at risk being considered insufficient for Predecessor to finance its activities without additional subordinated financial
support. Therefore, Predecessor was considered a Variable Interest Entity ("VIE") and the primary beneficiary of Predecessor
was treated as the accounting acquirer. PBAX holds a variable interest in Predecessor and owns
100
% of Predecessor's equity.
PBAX was considered the primary beneficiary as it has the decision-making rights that gives it the power to direct the most significant
activities. Also, PBAX retained the obligation to absorb the losses and/or receive the benefits of Predecessor that could have potentially
been significant to Predecessor. The Merger was accounted for as an asset acquisition as substantially all of the fair value was concentrated
in IPR&D, an intangible asset. Predecessor's assets (except for cash) and liabilities were measured at fair value as of the
transaction date. Consistent with authoritative guidance on the consolidation of a VIE that is not considered a business, differences
in the total purchase price and fair value of assets and liabilities are recorded as a gain or loss to the condensed consolidated statement
of operations. The loss reflected below on the consolidation of the VIE is reflected "on the line" (defined below) in the
Company's opening accumulated deficit.
Costs incurred in obtaining technology licenses
are charged to research and development expense as IPR&D if the technology licensed has not reached technological feasibility and
has no alternative future use. The IPR&D recorded at the Closing of $
45.6
million is reflected "on the line" in the
Company's opening accumulated deficit. To estimate the value of the acquired IPR&D, the Company used the avoided cost method,
which calculates a present value of a
45
% return on research and development effort applied to research and development expenditures over
the life of Predecessor. The determination of the fair value requires management to make a significant estimate of the return on research
and development expenditures. Changes in these assumptions could have a significant impact on the fair value of the IPR&D. The estimate
of the return on research and development expenditures was based on multiple published studies analyzing actual returns of research and
development expenditures.
The following is a summary of the purchase price
calculation (unaudited).
Number of shares of Common Stock
5,000,000
Multiplied by PBAX's share price, as of the Closing
$
5.85
Total
$
29,250,000
Fair value of PBAX founder's shares converted to shares of Common Stock and transferred to Predecessor stockholders
$
5,118,750
Fair value of contingent Common Stock consideration
$
12,870,000
Total Common Stock consideration
$
47,238,750
Assumed liabilities
3,311,153
Total purchase price
$
50,549,903
The allocation of the purchase price was as follows (unaudited).
Cash
$
963,855
Net working capital (excluding cash and cash equivalents)
(
1,819,514
)
Fixed assets
929,346
Acquired in-process research and development
45,640,000
Net assets acquired
45,713,687
Loss on consolidation of VIE
4,836,216
Total purchase price
$
50,549,903
F-
8
In connection with the Merger, the transactions
that occurred concurrently with the closing date of the Merger were reflected "on the line". "On the line" describes
those transactions triggered by the consummation of the Merger that are not recognized in the consolidated financial statements of the
Predecessor nor the Company as they are not directly attributable to either period but instead were contingent on the Merger. The opening
cash balance in the condensed consolidated statement of cash flow of $
1.88
million consists of $
0.92
million from PBAX and $
0.96
million
from Predecessor.
The number of shares of Common Stock issued and amounts recorded on the line within stockholders' deficit are
reflected below to arrive at the opening consolidated balance sheet of the Company.
Convertible
Preferred Stock
Series A
Additional
Stock
Series A
Common Stock
Paid-in
Subscription
Accumulated
Shares
Amount
Shares
Amount
Capital
Receivable
Deficit
Total
PBAX Closing Equity as of February 13, 2024
-
$
-
5,481,250
$
547
$
-
$
-
$
(
12,709,426
)
$
(
12,708,879
)
Forfeiture of founders shares
-
-
(
875,000
)
(
88
)
88
-
-
-
Adjusted shares outstanding
-
-
4,606,250
459
88
-
(
12,709,426
)
(
12,708,879
)
Shares issued as consideration in the Merger
-
-
8,075,000
808
47,237,942
-
-
47,238,750
Loss on VIE consolidation
-
-
-
-
-
-
(
4,836,215
)
(
4,836,215
)
Expense IPR&D
-
-
-
-
-
-
(
45,640,000
)
(
45,640,000
)
Reclassification of public shares
-
-
82,047
8
911,349
-
-
911,357
Issuance of common stock as payment to vendors
-
-
1,649,500
165
3,182,385
-
-
3,182,550
Elimination of deferred underwriting fees
-
-
-
-
5,690,000
-
-
5,690,000
Reclassification of earnout liability
-
-
-
-
(
4,900,000
)
-
-
(
4,900,000
)
Conversion of CERo bridge notes and accrued interest into Series A preferred stock
630
627,154
-
-
-
-
-
627,154
Conversion of working capital loan into Series A preferred stock
1,555
1,555,000
-
-
-
-
-
1,555,000
Issuance of Series A shares sold to investors
7,854
6,755,698
-
-
(
856,663
)
-
-
5,899,035
Issuance of Series A Warrants
-
-
-
-
2,000,000
(
2,000,000
)
-
-
Issuance of common shares to Keystone Capital LLC for equity line of credit
-
-
119,050
12
633,333
-
-
633,345
Opening Equity at February 14, 2024 (Successor)
10,039
$
8,937,852
14,531,847
$
1,452
$
53,898,434
$
(
2,000,000
)
$
(
63,185,641
)
$
(
2,347,903
)
F-
9
Going concern
– The accompanying
unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which
contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company's ability to
continue as a going concern is dependent on its ability to raise additional capital to fund its research and development ("R&D")
activities and meet its obligations on a timely basis. As of September 30, 2024, the Company reported $
3.4
million of cash, restricted
cash and cash equivalents, with an accumulated deficit of $
71.6
million. Additional funds are necessary to maintain current operations
and to continue R&D activities. The Company expects to seek additional funding in the form of equity financings or debt, however,
there can be no assurance that sufficient funding will be available to allow the Company to successfully continue its R&D activities
and planned regulatory filings with the FDA. If the Company is unable to obtain necessary funds, significant reductions in spending and
the delay or cancellation of planned activities may be necessary. These actions would have a material adverse effect on the Company's
business, results of operations, and prospects. These conditions raise substantial doubt about the Company's ability to continue
as a going concern within one year from the date these financial statements are issued. The accompanying unaudited condensed consolidated
financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the
amounts and classification of liabilities that might result from the outcome of this uncertainty.
Risks and uncertainties
– The Company
is subject to all of the risks inherent in an early-stage biotechnology company. These risks include, but are not limited to, limited
management resources, intense competition, and dependence upon the availability of cash to sustain operations. The Company's operating
results may be materially affected by the foregoing factors.
The Company's research also requires approvals
from the FDA prior to beginning clinical trials and prior to product commercialization. There can be no assurance that the Company's
current ongoing research and future clinical development will result in the granting of these required approvals. If the Company is denied
such approvals or such approvals are substantially delayed, they could have a material adverse effect upon the Company's future
financial results and cash flows.
NOTE 2 –
Significant Accounting Policies
Basis of presentation
– The accompanying
unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in
the United States of America ("GAAP") for interim financial information and in accordance with the instructions to Form 10-Q
and Article 8-03 of Regulation S-X of the SEC. Certain information or footnote disclosures normally included in financial statements prepared
in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting.
Accordingly, they do not include all the information and footnotes necessary for a complete presentation of financial position, results
of operations, or cash flows. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include
all adjustments, consisting of a normal recurring nature, which are necessary for a fair presentation of the financial position, operating
results and cash flows for the periods presented.
On February 14, 2024, the Company completed the
Merger with CERo Therapeutics, Inc., with CERo Therapeutics, Inc. surviving the Merger as a wholly-owned subsidiary of the Company, the
accounting acquirer. The transaction was accounted for as a forward Merger asset acquisition.
Unless the context otherwise requires, the "Company,"
for periods prior to the Closing, refers to CERo Therapeutics, Inc. ("Predecessor"), and for the periods after the Closing,
refers to CERo Therapeutics Holdings, Inc. ("Successor" or the "Company"). As a result of the Merger, the results
of operations, financial position and cash flows of the Predecessor and the Company are not directly comparable. CERo Therapeutics, Inc.
was deemed to be the predecessor entity. Accordingly, the historical financial statements of CERo Therapeutics, Inc. became the historical
financial statements of the combined Company, upon the consummation of the Merger. As a result, the financial statements included in this
report reflect (i) the historical operating results of CERo Therapeutics, Inc. prior to the Merger and (ii) the combined results of the
Company, CERo Therapeutics Holdings, Inc., following the Closing. The accompanying unaudited condensed consolidated financial statements
include a Predecessor period, which includes the period through February 13, 2024 concurrent with the Merger, and a Successor period from
February 14, 2024 through September 30, 2024. A black line between the Successor and Predecessor periods has been placed in the condensed
consolidated financial statements and in the tables to the notes to the condensed consolidated financial statements to highlight the lack
of comparability between these two periods.
F-
10
Use of estimates
– The preparation
of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of expenses
incurred during the reporting period. Items subject to such estimates and assumptions include the estimates of the fair values of acquired
in-process research and development, convertible preferred stock, common stock, earnout share liabilities, stock-based compensation expense,
the present value of right-to-use assets and lease liabilities, and the valuation allowance associated with deferred tax assets. Actual
results could differ from those estimates.
Cash, restricted cash, and cash equivalents
– The Company considers all highly liquid investments with an original maturity from the date of purchase of three months or
less to be cash equivalents. As of September 30, 2024 for the Company and December 31, 2023 for Predecessor, cash and cash equivalents
consist of cash deposited with banks, including a money market sweep account. Restricted cash for Predecessor and the Company consists
of $
74,756
and $
74,756
, respectively, held on account by a financial institution as collateral for a demand letter of credit issued as
a real estate security deposit.
Concentration of credit risk
– Financial
instruments that potentially subject the Company to credit risk consist primarily of cash, cash equivalents, and restricted cash. The
Company's cash, cash equivalents, and restricted cash are on deposit with two financial institutions that management believes are
of sufficiently high credit quality. Deposits at any of the Company's financial institutions may, at times, exceed federal insured
limits.
Property and equipment
– Property
and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated
useful lives of the respective assets, generally
three
to
five
years
or the remaining lease term for leasehold improvements, if shorter.
Expenditures for repairs and maintenance are charged to expense as incurred. Upon disposition, the cost and related accumulated depreciation
are removed from the accounts and the resulting gain or loss is reflected in the statements of operations.
Impairment of long-lived assets
–
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. When such an event occurs, management determines whether there has been an impairment by comparing the
anticipated undiscounted future net cash flows to the related asset's carrying value. If an asset is considered impaired, the asset
is written down to fair value, which is determined based either on discounted cash flows or appraised value, depending on the nature of
the asset. Through September 30, 2024, the Predecessor and the Company have not experienced any impairment losses on its long-lived assets.
Leases –
The Company determines if
an arrangement is, or contains, a lease at inception. Right-of-use ("ROU") assets represent the Company's right to use
an underlying asset during the lease term, and lease liabilities represent the Company's obligation to make lease payments arising
from the lease. ROU assets and lease liabilities are recognized at lease commencement based upon the estimated present value of unpaid
lease payments over the lease term using the Company's incremental borrowing rate applicable to the underlying asset unless the
implicit rate is readily determinable. The Company determines the lease term as the noncancellable period of the lease and may include
options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Leases with a term
of 12 months or less are not recognized on the balance sheets.
Certain leases include variable lease costs to
reimburse the lessor for real estate tax and insurance expenses, and certain non-lease components that transfer a distinct service to
the Lessee, such as common area maintenance services. The Company has elected to separate the accounting for fixed lease components and
variable and non-lease components for real estate and equipment leases. The variable lease costs are recorded on the consolidated statement
of operations as rent expense, within general and administrative expenses. The Company has no financing leases.
Derivative Financial Instruments
- The Company
evaluates financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives
in accordance with ASC Topic 815, "Derivatives and Hedging". Derivative instruments are initially recorded at fair value on
the grant date and re-valued at each reporting date, with changes in the fair value reported in the statements of operations. Derivative
assets and liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion
of the instrument could be required within 12 months of the balance sheet date.
F-
11
Fair value measurements
– Fair value
is the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants
on the measurement date. In determining fair value, the assumptions that market participants would use in pricing an asset or liability
(the inputs) are based on a tiered fair value hierarchy consisting of three levels, as follows:
Level 1
–
Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
Level 2
–
Inputs (other than quoted prices included in Level 1) that are either directly or indirectly observable for the asset or liability. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3
–
Unobservable inputs for which there is little or no market data and which require the Company to develop its own assumptions about how market participants would price the asset or liability. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
The categorization of a financial instrument within
the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The carrying amounts of cash, restricted cash,
and cash equivalents, prepaid expenses and other current assets, accounts payable, and accrued liabilities approximate fair value due
to their relatively short-term maturities.
Research and development
– R&D
costs consist primarily of salaries and benefits, including stock-based compensation, occupancy, materials and supplies, contracted research,
consulting arrangements, and other expenses incurred in the pursuit of R&D programs. R&D costs are expensed as incurred.
Stock-based compensation
– The Company
periodically issues Common Stock and stock options to officers, directors, and consultants for services rendered. The Company accounts
for stock-based compensation as measured at grant date, based on the fair value of the award. The Company uses a Black-Scholes option
pricing model ("Black-Scholes") to estimate option award fair value, which requires the input of subjective assumptions, including
the expected volatility of the Company's Common Stock, expected risk-free interest rate, and the option's expected life. The
Company also evaluates the impact of modifications made to the original terms of equity awards when they occur. The fair value of restricted
stock awards is based upon the share price of the Common Stock on the date of grant.
The fair value of equity awards that are expected
to vest is amortized on a straight-line basis over the requisite service period. Stock-based compensation expense is recognized net of
actual forfeitures when they occur, as an increase to additional paid-in capital in the condensed consolidated balance sheets and in research
and development or, general and administrative expenses in the condensed consolidated statements of operations. All stock-based compensation
costs are recorded in the condensed consolidated statements of operations based upon the underlying employee's role within the Company.
Income taxes
– The Company accounts
for income taxes under the liability method. Under this method, deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences
are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts
expected to be realized.
The Company follows tax accounting requirements
for the recognition, measurement, presentation, and disclosure in the financial statements of any uncertain tax positions that have been
taken or expected to be taken on a tax return. No liability related to uncertain tax positions is recorded in the financial statements.
It is the Company's policy to include penalties and interest expense related to income taxes as a component of income tax expense,
as necessary. The Company has not recorded any interest or penalties associated with income tax since inception. Tax years subsequent
to 2020 are subject to examination by federal and state authorities.
F-
12
NOTE 3 –
NET LOSS PER SHARE OF COMMON STOCK
The accounting standards require the presentation
of both basic and diluted earnings per share on the face of the statements of operations. The Company's basic net loss per share
is computed by dividing net loss by the weighted average number of shares of Common Stock outstanding for the period. If there are dilutive
securities, diluted income per share is computed by including Common Stock equivalents which includes shares issuable upon the exercise
of stock options, warrants, and conversion of preferred stock into shares of Common Stock, net of any shares assumed to have been purchased
with the proceeds, using the treasury stock method. In periods for which the Company reports a net loss, the Common Stock equivalents
are not included, as they would be anti-dilutive.
The following table summarizes the number of shares
of Common Stock issuable upon conversion or exercise, as applicable, of convertible securities, stock options, and warrants that were
not included in the calculation of diluted net loss per share because such shares are antidilutive:
September 30,
2024
September 30,
2023
(Successor)
(Predecessor)
Conversion of convertible preferred stock issued and outstanding
84,770,124
27,920,467
Conversion of convertible preferred stock underlying convertible preferred stock warrants
49,797,736
1,849,638
Exercise of common warrants into common stock
18,305,411
-
Common stock reserved for employee stock option plan (ESPP)
527,182
-
Common stock underlying outstanding options
2,657,486
894,500
156,057,939
30,664,605
NOTE 4 –
PROPERTY AND EQUIPMENT
Property and equipment, net, consists of the following:
September 30,
2024
December 31,
2023
(Successor)
(Predecessor)
Laboratory equipment
$
2,507,839
$
2,507,839
Computers
38,323
38,323
Furniture
8,429
8,429
Less: Accumulated depreciation
(
1,929,691
)
(
1,587,889
)
$
624,900
$
966,702
Depreciation expense for the period from February
14, 2024 through September 30, 2024 for Successor was $
304,446
. Predecessor depreciation expense for the period January 1, 2024 through
February 13, 2024 and for the nine months ended September 30, 2023 was $
37,356
and $
346,164
, respectively. The Company's depreciation
expense for the three months ended September 30, 2024 and the Predecessor's depreciation expense for the three months ended September
30, 2023 was $
113,855
and $
115,388
, respectively.
F-
13
NOTE 5 –
ACCRUED LIABILITIES
Accrued liabilities consisted of the following:
September 30,
2024
December 31,
2023
(Successor)
(Predecessor)
Employee-related liabilities
$
49,117
$
68,697
Accrued taxes
85,148
-
Accrued legal expenses
172,000
46,466
Accrued interest
-
27,637
Penalty for late S-1 filing and effectiveness
645,693
-
Accrued consulting and professional services
538,000
-
Accrued toxicology expense
144,619
-
Accrued clinical services
26,879
-
Other accrued expenses
31,071
1,833
$
1,692,527
$
144,633
NOTE
6 – Leases
The Company holds a five-year lease for laboratory
and office space. The lease has escalating contractual rent and variable rent components and the Company elected to separate the contractual
and variable elements for valuing the operating lease liability and right-to-use asset. The lease does not have any options for extension
or expansion.
The Company recorded the following lease costs:
For the three months
ended September 30,
For the
period from
February 14,
2024 through
September 30,
For the
period from
January 1,
2024 through
February 13,
For the nine months
ended
September 30,
2024
2023
2024
2024
2023
(Successor)
(Successor)
(Successor)
(Predecessor)
(Predecessor)
Operating leases:
Operating lease cost
$
229,331
$
233,375
$
585,702
$
110,885
$
695,365
Variable operating lease cost
177,056
147,942
441,560
84,401
488,867
Total lease cost
$
406,387
$
381,317
$
1,027,262
$
195,286
$
1,184,232
September 30,
2024
December 31,
2023
(Successor)
(Predecessor)
Right-of-use assets, net
$
1,652,614
$
2,189,565
Operating lease liabilities, current
$
931,023
$
769,092
Operating lease liabilities, non-current
771,525
1,575,499
Total operating lease liabilities
$
1,702,548
$
2,344,591
Weighted-average remaining lease term of operating leases (in years)
2.00
2.75
Weighted-average discount rate for operating leases
9.60
%
9.60
%
F-
14
The following table reconciles the undiscounted
future minimum lease payments (displayed by year and in the aggregate) under non-cancelable operating leases with terms of more than
one
year
to the total operating lease liabilities recognized on the Company's condensed consolidated balance sheets as of September
30, 2024:
Maturity of the Company's lease liabilities
as of September 30, 2024:
Remainder of 2024
$
168,133
2025
990,055
2026
726,394
Total lease payments
1,884,582
Less: imputed interest
(
182,034
)
Total lease liabilities
$
1,702,548
NOTE
7 – STOCKHOLDERS' DEFICIT
Successor Series A Convertible Preferred
Stock
The Company designated
12,580
shares of its authorized
preferred stock as the Series A Preferred Stock and the rights, preferences and privileges of the Series A Preferred Stock are summarized
below.
Each share of Series A Preferred Stock has a stated
value of $
1,000
per share and, when issued, the Series A Preferred Stock was fully paid and non-assessable. The Series A Preferred Stock,
ranks senior to all other Company capital stock unless required holder votes are obtained to create a class of stock senior to Series
A Preferred Stock. The requisite holders of Series A Preferred Stock consented to the issuance of the Series C Preferred Stock described
below, which ranks senior to the Series A Preferred Stock and Series B Preferred Stock.
Dividend and Participation Rights:
The
holders of Series A Preferred Stock will be entitled to dividends, on an as-if converted basis, equal to and in the same form as dividends
actually paid on shares of Common Stock, when and if actually paid. Series A Preferred Stockholders will be entitled to participate pro
rata in any purchase rights extended to holders of Common Stock on an as-converted basis.
Conversion:
Each holder of Series A Preferred
Stock may convert at any time, all, or any part, of the outstanding Series A Preferred Stock into shares of the Common Stock at the initial
"Conversion Price" of $
10.00
, which is subject to customary adjustments for stock splits. The Company's Board of Directors
has the right, at any time, with the written consent of the Required Holders (as defined in the Certificate of Designation of Preferences,
Rights and Limitations of the Series A Convertible Preferred Stock (the "Series A Certificate of Designations")), to lower
the fixed conversion price to any amount and for any period of time. If 90 days or 180 days following the occurrence of the effective
date of the registration statement filed pursuant to the PIPE Registration Rights Agreement, the Conversion Price then in effect is greater
than the greater of $
1.00
and the Market Price then in effect (the "Adjustment Price"), the Conversion Price shall automatically
lower to the Adjustment Price. In connection with such adjustment provisions, the Conversion Price has been reset to $
1.00
.
F-
15
Alternate Conversion:
Following the occurrence
and during the continuance of a Trigger Event (as defined below), each holder may alternatively elect to convert the Series A Preferred
Stock at the "Alternate Conversion Price" equal to the lesser of the Conversion Price and the greater of $
1.00
(the "Conversion
Price Floor") or
80
% of the 5-day volume weighted average price of a share of Common Stock. Trigger events include customary terms
related to exchange listing, registration rights, failure to deliver shares on conversion or exercise of derivative instruments, or insolvency.
Notwithstanding the Conversion Price Floor, if the Conversion Price Floor is greater than
80
% of the 5-day volume weighted average price
of a share of Common Stock, then the Conversion Amount (as defined in the Certificates of Designations, (as defined below) is increased
by a multiplier resulting in the convertibility of the shares of Series A Preferred Stock into the number of shares of Common Stock that
would have been issuable if the Alternate Conversion Price had been equal to such lower volume weighted average price. Such multiplier
has been in effect since the registration statement for the resale of shares of Common Stock issuable upon conversion of the Series A
Preferred Stock was declared effective on July 5, 2024 because such effectiveness was after the applicable deadline therefore and, as
a result of such multiplier, such registration statement registered fewer than the maximum number of shares of Common Stock issuable upon
such conversion.
Redemptions:
Upon bankruptcy or liquidation,
Series A Preferred Stock will be redeemed at a
25
% premium (
50
% premium after 180 days after issuance) to the greater of the conversion
amount or the number of shares multiplied by the highest closing price within the preceding 20 days. Additionally, the Company may voluntarily
redeem the Series A Preferred Stock as at
20
% premium to the greater of the conversion amount or the number of shares multiplied by the
highest closing price within the preceding 20 days.
The holders of the Series A Preferred Stock have
no voting rights.
In February 2024, the Company consummated a private
placement (the "Series A PIPE Financing") of
10,039
shares of Series A Preferred Stock, warrants to purchase
612,746
shares
of Common Stock (the "February 2024 PIPE Common Warrants") and warrants to purchase
2,500
shares of Series A Preferred Stock
(the "Preferred Warrants") (See Note 8 below), pursuant to the Amended and Restated Securities Purchase Agreement, dated February
14, 2024, by and among the Company, PBAX and certain accredited investors (the "Initial Investors") for aggregate cash proceeds
to the Company of approximately $
10.0
million, including cash previously received for bridge loan proceeds.
A portion of such Series A Preferred Stock was
issued as consideration for the cancellation of outstanding indebtedness, including a promissory note of PBAX amounting to $
1,555,000
and the Predecessor's convertible notes amounting to $
627,154
.
The Company accounts for preferred stock as either
equity or debt-like securities based on an assessment of the Preferred Stock rights and preferences and applicable authoritative guidance
in ASC 480 and ASC 815, Derivatives and Hedging. The Company has concluded that the Series A and Series B Preferred Stock, which have
no cash redemption features outside of the Company's control are treated as equity. The Company has also concluded that the Series
A Common Warrants do not possess redemption features outside of the Company's control and are treated as equity.
Due to delayed filing and declaration of effectiveness
relative to the deadlines defined in the Registration Rights Agreement, the Company accrued for an aggregate $
608,363
penalty as of June
30, 2024, payable in cash to the holders of Series A Preferred Stock.
In the three months ended September 30, 2024,
7,005
shares of Series A Preferred Stock were converted into
108,948,903
shares of Common Stock. As of September 30, 2024, there were
3,075
remaining shares of Series A Preferred Stock, which were convertible into
62,196,602
shares of Common Stock.
F-
16
Successor Series B Convertible Preferred
Stock
The Company designated 626 shares of its authorized
preferred stock as Series B Preferred Stock and established the rights, preferences and privileges of the Series B Preferred Stock pursuant
to the Certificate of Designation of Preferences, Rights and Limitations of the Series B Convertible Preferred Stock (the "Series
B Certificate of Designations" and, together with the Series A Certificate of Designations, the "Certificates of Designations"),
as summarized below. Except as set forth below, the Series B Preferred Stock has terms and provisions that are identical to those of the
Series A Preferred Stock.
On April 1, 2024, we consummated a private placement
of
626
shares of the Company Series B Preferred Stock, pursuant to the Securities Purchase Agreement, dated March 28, 2024, by and among
us and certain accredited investors (the "Additional Investors" and, together with the Initial Investors, the "PIPE
Investors"), for aggregate cash proceeds to us of approximately $
0.5
million. Such private placement closed on April 1, 2024.
The holders of the Series B Preferred Stock have
no voting rights.
The Series B Preferred Stock ranks pari passu
with the Series A Preferred Stock.
Due to delayed filing and declaration of effectiveness
relative to the deadlines defined in the Registration Rights Agreement, the Company accrued for an aggregate $
37,330
penalty as of June
30, 2024, payable in cash to the holders of Series B Preferred Stock.
In the three months ended September 30, 2024,
140
shares of Series B Preferred Stock were converted into
1,244,040
shares of Common Stock. As of September 30, 2024, there were
486
remaining shares of Series B Preferred Stock, which were convertible into
9,830,097
shares of Common Stock.
Successor Series C Convertible Preferred
Stock
The Company designated
2,853
shares of its authorized
preferred stock as the Series C Preferred Stock and the rights, preferences and privileges of the Series C Preferred Stock are summarized
below.
Each share of Series C Preferred Stock has a stated
value of $
1,000
per share and, when issued, the Series C Preferred Stock was fully paid and non-assessable. The Series C Preferred Stock,
ranks senior to all other Company capital stock unless required holder votes are obtained to create a class of stock senior to Series
C Preferred Stock.
Ranking:
The Series C Preferred Stock are
senior in rank with respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding
up of the Company to the Series A Convertible Preferred Stock, the Series B Convertible Preferred Stock, and Common Stock. The Company
shall not, without the consent of the Required Holders, authorize or issue any shares of senior rank with respect to the preferences as
to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company, shares of pari passu rank with
respect to the preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company,
or shares of junior ranking stock that have a maturity or redemption date prior to the first anniversary of the Series C Preferred Stock
issuance date.
Dividend and Participation Rights: The holders
of Series C Preferred Stock will be entitled to dividends, on an as-if converted basis, equal to and in the same form as dividends actually
paid on shares of Common Stock, when and if actually paid. Series C Preferred Stockholders will be entitled to participate pro rata in
any purchase rights extended to holders of Common Stock on an as-converted basis.
Conversion:
Each holder of Series C Preferred
Stock may convert at any time, all, or any part, of the outstanding Series A Preferred Stock into shares of the Common Stock at the initial
"Conversion Price" of $
0.224
, which is subject to customary adjustments for stock splits.
Alternate Conversion:
Following the occurrence
and during the continuance of a Trigger Event (as defined below), each holder may alternatively elect to convert the Series C Preferred
Stock at the "Alternate Conversion Price" equal to the lesser of the then current Conversion Price and the greater of $
0.0196
(the "Conversion Price Floor") or
80
% of the trailing 5-day daily volume weighted average price of a share of Common Stock.
Trigger events include customary terms related to exchange listing, registration rights, failure to deliver shares on conversion or exercise
of derivative instruments, or insolvency. Notwithstanding the Conversion Price Floor, if the Conversion Price Floor is greater than
80
%
of the 5-day volume weighted average price of a share of Common Stock, then the Conversion Amount (as defined in the Certificates of Designations)
for such Series C Preferred Stock is increased by a multiplier resulting in the convertibility of the shares of Series C Preferred Stock
into the number of shares of Common Stock that would have been issuable if the Alternate Conversion Price had been equal to such lower
volume weighted average price.
F-
17
Redemptions:
Upon bankruptcy or liquidation,
Series C Preferred Stock will be redeemed at a
25
% premium to the conversion amount multiplied by the highest Alternative Conversion Price
within the preceding 20 days multiplied by
125
% of the greatest closing sale price of the Common Stock on any day immediately following
public announcement of insolvency and the date the entire redemption payment has been made. Additionally, the Company may voluntarily
redeem the Series C Preferred Stock as at
25
% premium to the greater of the conversion amount or the number of shares multiplied by the
highest closing price within the preceding 20 days.
The holders of the Series C Preferred Stock have
no voting rights.
In September 2024, the Company consummated a private
placement (the "Series C PIPE Financing") of
2,853
shares of Series C Preferred Stock and warrants to purchase
8,175,166
shares
of Common Stock (the "September 2024 PIPE Common Warrants") (See Note 8 below), pursuant to the Securities Purchase Agreement,
dated September 25, 2024, by and among the Company and certain accredited investors for aggregate cash proceeds to the Company of approximately
$
1.25
million.
The Company accounts for preferred stock as either
equity or debt-like securities based on an assessment of the Preferred Stock rights and preferences and applicable authoritative guidance
in ASC 480 and ASC 815, Derivatives and Hedging. The Company has concluded that the Series C Preferred Stock, which has no cash redemption
features outside of the Company's control are treated as equity. The Company has also concluded that the Series C Common Warrants
do not possess redemption features outside of the Company's control and are treated as equity.
Predecessor Preferred Stock Conversion to
Common Stock
At December 31, 2023, Predecessor had
75,120,105
shares of capital stock authorized, consisting of
45,350,000
shares of Predecessor common stock and
29,770,105
shares of Predecessor convertible
preferred stock. All classes of the Predecessor's stock had a par value of $
0.0001
. On February 14, 2024, on the close of the Merger,
the Predecessor's outstanding convertible preferred stock converted to Common Stock at a conversion ratio of
0.0806
and
0.1757
shares
of Common Stock for each share of Predecessor Series Seed Convertible Preferred Stock and Predecessor Series A Convertible Preferred
Stock, respectively. This resulted in the issuance of
415,498
and
3,999,997
shares of Common Stock for the Predecessor's Series
Seed Preferred Stock and Predecessor Series A Preferred Stock, respectively.
Predecessor's Series Seed and Series A Preferred
Stock had cash redemption features outside of its control, and therefore were classified in a mezzanine section presented on the balance
sheets between liabilities and stockholders' deficit.
Purchase of Common Stock by Keystone Capital
Partners under the Equity Line of Credit ("ELOC")
On February 14, 2024, in conjunction with, and
as a condition to the closing of the Series A PIPE Financing, the Company entered into a common stock purchase agreement (the "Keystone
Purchase Agreement") with Keystone Capital Partners, L.P. ("Keystone"), pursuant to which we may sell and issue, and
Keystone is obligated to purchase, up to
25,000,000
shares subject to the Company obtaining all necessary stockholder approvals to issue
the shares to Keystone. The price of the shares purchased by Keystone under the ELOC is
90
% of various volume-weighted average price ("VWAP")
and closing price-based formulae, and requires a waiver, should the selling price be below $1.00 per share. As consideration for Keystone's
commitment to purchase shares of Common Stock pursuant to the Keystone Purchase Agreement, we issued an aggregate of
1,864,345
shares
of Common Stock to Keystone.
In the three and nine months ended September 30,
2024, the Company sold approximately
13.0
million shares for gross proceeds of approximately
1.7
million, and
20.9
million shares for
gross proceeds of approximately $
1.7
and $
4.3
million, respectively, under the Keystone ELOC. The Company sought and received a waiver
to sell the shares below $
1.00
per share. The Company also issued
1,613,944
and
1,864,295
shares of common stock to Keystone as consideration
for the ELOC in the three-month period ended September 30, 2024 and the period from February 14, 2024 to September 30, 2024, respectively.
F-
18
Issuance of Common Stock to Arena Business
Solutions Global SPC II, Ltd. ("Arena")
for the Arena ELOC
On February 23, 2024, the Company entered into
a common stock purchase agreement (the "Arena Purchase Agreement") with Arena, pursuant to which we may sell and issue, and
Arena is obligated to purchase, up to $
25,000,000
of Common Stock. The price of the shares purchased by Arena under the ELOC is
90
% of
various VWAP and closing price-based formulae, and requires a waiver, should the selling price be below $
0.25
per share. As consideration
for Arena commitment to purchase shares of Common Stock pursuant to the Arena Purchase Agreement, the Company issued no shares and
345,566
shares of Common Stock to Arena during the three and nine-month period ended September 30, 2024, respectively. The Company has sold no
shares of Common Stock to Arena under the Arena ELOC in the nine-month period ended September 30, 2024.
NOTE
8 – WarrantS
Accounting for warrants
The Company accounts for warrants as either equity-classified
or liability-classified instruments based on an assessment of the instruments' specific terms and applicable authoritative guidance
in ASC 480 and ASC 815, Derivatives and Hedging. The assessment considers whether the instruments are free standing financial instruments
pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments meet all of the requirements
for equity classification under ASC 815, including whether the instruments are indexed to the Company's own common stock and whether
the instrument holders could potentially require "net cash settlement" in a circumstance outside of the Company's control,
among other conditions for equity classification. This assessment, which requires the use of professional judgment, was conducted at the
time of warrant issuance and as of each subsequent period end date while the instruments are outstanding.
Public Warrants
At September 30, 2024, there were
9,192,500
Public
Warrants outstanding, each with a right to purchase
one
share of Common Stock for $
11.50
. The Public Warrants became exercisable
30
days
after the Merger. No warrants will be exercisable for cash unless the Company has an effective and current registration statement covering
the Common Stock issuable upon exercise of the warrants and a current prospectus relating to such Common Stock. The warrants were registered
under a resale registration statement on Form S-1 (File No. 333-279156), which was declared effective by the Securities and Exchange Commission
on July 5, 2024.
Notwithstanding the foregoing, warrant holders
may, during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants on a cashless
basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is available. If that
exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless basis. The Public
Warrants will expire
five years
after the Merger or earlier upon redemption or liquidation.
Once the warrants became exercisable, the Company
may, with
30
days prior notice, redeem the Public Warrants in whole and not in part, at a price of $
0.01
per warrant if the shares underlying
the warrants are registered and if the closing price of Common Stock equals or exceeds $
18.00
for
20
of the prior
30
trading days. If
the Company calls the Public Warrants for redemption, management will have the option to require all holders that wish to exercise the
Public Warrants to do so on a "cashless basis," as described in the warrant agreement.
The exercise price and number of shares of Common
Stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary
dividend or recapitalization, reorganization, merger, or consolidation. However, the warrants will not be adjusted for issuances of Common
Stock at a price below their respective exercise prices. Additionally, in no event will the Company be required to net cash settle the
warrants.
As discussed above, the Company accounts for warrants
as either equity-classified or liability-classified instruments based on an assessment of the instruments' specific terms and applicable
authoritative guidance in ASC 480 and ASC 815, Derivatives and Hedging. Management has concluded that the Public Warrants and Private
Placement Warrants issued pursuant to the warrant agreement qualify for equity accounting treatment.
F-
19
Conversion warrants
On November 14, 2019, Predecessor issued warrants
to purchase a total of
1,849,638
shares of Predecessor Series A Preferred Stock at a price of $
1.7571
per share. The warrants were exercisable
into shares of Predecessor Series A Preferred Stock at the discretion of the holder, at any time in the
five years
after issuance.
The warrants were analyzed and determined to be freestanding instruments issued in a transaction including the conversion or sale of the
Series A Preferred Stock. A warrant to purchase up to
426,839
shares of Series A Preferred Stock was issued in a transaction that included
the conversion of
100
shares of Series 1 Preferred Stock into
2,845,597
shares of Predecessor Series A Preferred Stock. Another warrant
to purchase up to
1,422,799
shares of Series A Preferred Stock was issued concurrent with the purchase of
2,845,597
shares of Series A
Preferred Stock. These warrants are collectively referred to as the "Predecessor preferred stock warrants." On February 14,
2024, the Predecessor preferred stock warrants were converted into warrants to purchase up to
324,999
shares of Common Stock ("Conversion
Warrants").
The Conversion Warrants will initially be exercisable
for Common Stock at an exercise price equal to $
10.00
. The exercise price is subject to adjustment for stock splits, combinations and
similar events, and, in the event of stock dividends and splits, the number of shares of Common Stock issuable upon the exercise of the
Conversion Warrant will also be adjusted so that the aggregate exercise price shall be the same immediately before and immediately after
any such adjustment.
The Conversion Warrants will expire
five years
after the original Predecessor warrants were issued, or November 14, 2024. The Conversion Warrants will automatically convert at the end
of the exercise period if the fair market value (as determined in the Conversion Warrants) of a share of Common Stock underlying the Conversion
Warrants is greater than the exercise price in effect on such date.
As discussed above, Predecessor accounts for warrants
as either equity-classified or liability-classified instruments based on an assessment of the instruments' specific terms and applicable
authoritative guidance in ASC 480 and ASC 815, Derivatives and Hedging. Based on the exercisability of the Predecessor Preferred Warrants
into Series A Preferred Stock, which had a cash redemption feature outside of the control of Predecessor, the Predecessor warrants were
recorded as a derivative liability and were revalued at each reporting period, with the change in value being recorded on the Statement
of Operations.
The Company's Conversion Warrants are exercisable
into Common Stock, which has no cash redemption features that require liability treatment and the Company recorded the Conversion Warrants
as equity.
February 2024 PIPE Common Warrants (Successor)
The Company's February 2024 PIPE Common
Warrants are initially exercisable for cash at an exercise price equal to the greater of (x) $
9.20
(as adjusted for stock splits, stock
dividends, stock combinations, recapitalizations and similar events) and (y) the closing price of the Common Stock on the trading day
immediately prior to the Subscription Date (as defined in the February 2024 PIPE Common Warrant Agreement). The exercise price is subject
to adjustment for stock splits, combinations and similar events, and, in the event of stock dividends and splits, the number of shares
of Common Stock issuable upon the exercise of the February 2024 PIPE Common Warrants will also be adjusted so that the aggregate exercise
price shall be the same immediately before and immediately after any such adjustment. On Stockholder approval for the issuance of shares
underlying the warrants, granted April 30, 2024, the exercise price of the February 2024 PIPE Common Warrants was adjusted to $
1.39
per
share, per the terms of the Securities Purchase Agreement.
The February 2024 PIPE Common Warrants will be
exercisable beginning six months after the issuance date (the "Initial Exercisability Date") and expiring on the third anniversary
of the Initial Exercisability Date. The February 2024 PIPE Common Warrants require "buy-in" payments to be made by us for
failure to deliver any shares of Common Stock issuable upon exercise.
If at the time of exercise of the February 2024
PIPE Common Warrants, there is no effective registration statement registering the shares of the Common Stock underlying the Common February
2024 PIPE Warrants, such warrants may be exercised on a cashless basis pursuant to their terms.
F-
20
If we issue options, convertible securities, warrants,
shares, or similar securities to holders of Common Stock, each holder of February 2024 PIPE Common Warrants has the right to acquire the
same as if the holder had exercised its February 2024 PIPE Common Warrants. The holders of February 2024 PIPE Common Warrants are entitled
to receive any dividends paid or distributions made to our holders of Common Stock on an "as if converted" basis.
The February 2024 PIPE Common Warrants prohibit
us from entering into specified fundamental transactions unless the successor entity assumes all of our obligations under the February
2024 PIPE Common Warrants under a written agreement before the transaction is completed. Upon specified corporate events, a holder of
February 2024 PIPE Common Warrants will thereafter have the right to receive upon an exercise such shares, securities, cash, assets or
any other property whatsoever which the holder would have been entitled to receive upon the happening of the applicable corporate event
had the February 2024 PIPE Common Warrants been exercised immediately prior to the applicable corporate event. When there is a transaction
involving specified changes of control, a holder of February 2024 PIPE Common Warrants can request the Company to exchange the then unexercised portion of their February 2024 PIPE Common Warrants for consideration equal to the Black-Scholes
value thereof, which shall be settled, at the option of the Company in either (i) the form of rights convertible into the consideration
receivable by holders of the underlying shares of common stock, based upon the value of the shares of the successor entity over a specified
period or (ii) cash in an amount equal to the Black-Scholes value.
The Company's February 2024 PIPE Common
Warrants are exercisable into Common Stock, which has no cash redemption features that require liability treatment. The Company has recorded
the February 2024 PIPE Common Warrants as equity.
September 2024 PIPE Common Warrants (Successor)
The Company's September 2024 PIPE Common
Warrants are initially exercisable for cash at an initial exercise price equal to $
0.098
(as adjusted for stock splits, stock dividends,
stock combinations, recapitalizations and similar events). The exercise price is also subject to adjustment for the sale of Common Stock,
or issuance or modification of options to a result in the purchase of a Common Share at an effective price per share lower than the then
current September 2024 PIPE Common Warrant exercise price. Additionally, should the Company issue any variable priced convertible securities,
the holders may elect an alternative exercise price that allows exercise at the effective purchase price applicable to the convertible
security.
The September 2024 PIPE Common Warrants will be
exercisable beginning six months after the issuance date (the "Initial Exercisability Date") and expiring on the third anniversary
of the Initial Exercisability Date. The September 2024 PIPE Common Warrants require "buy-in" payments to be made by us for
failure to deliver any shares of Common Stock issuable upon exercise.
If at the time of exercise of the September 2024
PIPE Common Warrants, there is no effective registration statement registering the shares of the Common Stock underlying the Common September
2024 PIPE Warrants, such warrants may be exercised on a cashless basis pursuant to their terms.
If we issue options, convertible securities, warrants,
shares, or similar securities to holders of Common Stock, each holder of September 2024 PIPE Common Warrants has the right to acquire
the same as if the holder had exercised its September 2024 PIPE Common Warrants. The holders of September 2024 PIPE Common Warrants are
entitled to receive any dividends paid or distributions made to our holders of Common Stock on an "as if converted" basis.
The September 2024 PIPE Common Warrants prohibit
us from entering into specified fundamental transactions unless the successor entity assumes all of our obligations under the September
2024 PIPE Common Warrants under a written agreement before the transaction is completed. Upon specified corporate events, a holder of
September 2024 PIPE Common Warrants will thereafter have the right to receive upon an exercise such shares, securities, cash, assets or
any other property whatsoever which the holder would have been entitled to receive upon the happening of the applicable corporate event
had the September 2024 PIPE Common Warrants been exercised immediately prior to the applicable corporate event. When there is a transaction
involving specified changes of control, a holder of September 2024 PIPE Common Warrants can request the Company to exchange the then unexercised portion of their September 2024 PIPE Common Warrants for consideration equal to the Black-Scholes
value thereof, which shall be settled, at the option of the Company in either (i) the form of rights convertible into the consideration
receivable by holders of the underlying shares of common stock, based upon the value of the shares of the successor entity over a specified
period or (ii) cash in an amount equal to the Black-Scholes value.
F-
21
The Company's September 2024 PIPE Common
Warrants are exercisable into Common Stock, which has no cash redemption features that require liability treatment. The Company has recorded
the September 2024 PIPE Common Warrants as equity.
Preferred Warrants
The Preferred Warrants will initially be exercisable
for cash at an exercise price equal to $
800
. The exercise price is subject to adjustment for stock splits, combinations and similar events,
and, in the event of stock dividends and splits, the number of shares of Series A Preferred Stock issuable upon the exercise of the Preferred
Warrant will also be adjusted so that the aggregate exercise price shall be the same immediately before and immediately after any such
adjustment.
The Preferred Warrants will expire on the first
anniversary of the closing of the Merger, or February 14, 2025.
We have the right, conditional upon the share
price of CERO stock to be trading above $
1.00
per share, to require the holders of Preferred Warrants to exercise such Preferred Warrants
into up to an aggregate number of shares of Preferred Stock equal to the holder's pro rata amount of
2,500
shares of Preferred Stock.
In connection with the Series C PIPE Financing, we agreed with certain holders of the Preferred Warrants not to exercise such right to
require such exercise by the holders thereof in consideration for their investment in the Series C PIPE Financing.
The Preferred Warrants prohibit us from entering
into specified fundamental transactions unless the Successor assumes all of our obligations under the Preferred Warrants under a written
agreement before the transaction is completed. Upon specified corporate events, a holder of the Preferred Warrants will thereafter have
the right to receive upon an exercise such shares, securities, cash, assets or any other property whatsoever which the holder would have
been entitled to receive upon the happening of the applicable corporate event had the Preferred Warrant been exercised immediately prior
to the applicable corporate event.
In the three-month period ended September 30,
2024,
38
Series A Preferred Warrants were converted into shares of Series A Preferred Stock for proceeds of $
38,000
.
The Company's Preferred Warrants are exercisable
into Series A Preferred Stock, which has no cash redemption features that require liability treatment. The Company has recorded the Preferred
Warrants as equity.
The Company warrants outstanding at September
30, 2024 are presented below:
Balance
September 30,
2024
Common Warrants
Preferred Warrants (Predecessor)
-
Public Warrants (Successor)
9,192,500
Conversion Warrants (Successor)
324,999
Common February 2024 PIPE Warrants (Successor)
612,746
Common September 2024 PIPE Warrants (Successor)
8,175,166
Weighted average exercise price
$
6.04
Weighted average remaining life (years)
3.9
Series A Preferred Warrants (Successor)
2,462
Exercise price
$
800
Remaining life (years)
0.38
F-
22
NOTE
9 – FAIR VALUE MEASUREMENTS
Predecessor estimated the fair value of the Predecessor
Series A Preferred Stock Warrants at December 31, 2023, using Black-Scholes with the following assumptions:
December 31,
2023
(Predecessor)
Risk-free interest rate
5.40
%
Expected life (in years)
0.25
Expected dividend yield
-
%
Expected volatility
65.90
%
The Company initially recorded the Earnout liability
at estimated fair value using a Monte Carlo analysis and has revalued the Earnout liability at each subsequent period.
The Monte Carlo
analysis used the following assumptions:
September 30,
February 14
2024
2024
(Successor)
(Successor)
Starting share price
$
0.09
$
4.90
Tranche 1 trigger price
$
1.25
$
3.20
Tranche 2 trigger price
$
1.50
$
3.85
Contractual term
3.4
4.0
Volatility
90
%
90
%
Risk-free interest rate
3.52
%
4.20
%
At September 30, 2024 for the Successor and December 31,
2023 for the Predecessor, the fair value of derivative liabilities were classified as follows:
The classification of the fair value of derivative
liabilities and the change in the fair value measurement using significant inputs (Level 3) for the period from December 31, 2022
through September 30, 2023 and December 31, 2023 through February 14, 2024 for Predecessor and February 14, 2024 through September 30,
2024 for the Company is presented below:
Level 1
Level 2
Level 3
Total
Preferred stock warrant liability (Predecessor):
Balance at January 1, 2024
$
-
$
-
$
320,117
$
320,117
Reclassification of warrant liability to equity
-
-
(
320,117
)
(
320,117
)
Balance at February 13, 2024
-
-
-
-
Earnout liability (Successor):
Balance at February 14, 2024
-
-
4,900,000
4,900,000
(Gain) on revaluation of earnout liability
-
-
(
1,800,000
)
(
1,800,000
)
Balance at March 31, 2024
-
-
3,100,000
3,100,000
(Gain) on revaluation of earnout liability
-
-
(
2,900,000
)
(
2,900,000
)
Balance at June 30, 2024
$
-
$
-
$
200,000
$
200,000
(Gain) on revaluation of earnout liability
-
-
(
170,000
)
(
170,000
)
Balance at September 30, 2024
$
-
$
-
$
30,000
$
30,000
Level 1
Level 2
Level 3
Total
Preferred stock warrant liability (Predecessor):
Balance at January 1, 2023
$
-
$
-
$
610,381
$
610,381
Loss on revaluation of warrant liability
-
-
36,657
36,657
Balance at March 31, 2023
-
-
647,038
647,038
Gain on revaluation of warrant liability
-
-
(
261,822
)
(
261,822
)
Balance at June 30, 2023
$
-
$
-
$
385,216
$
385,216
Gain on revaluation of warrant liability
-
-
(
186,067
)
(
186,067
)
Balance at September 30, 2023
$
-
$
-
$
199,149
$
199,149
F-
23
NOTE
10 – STOCK-BASED COMPENSATION
In October 2016, Predecessor's Board of
Directors approved the adoption of an Equity Incentive Plan ("Predecessor EIP"). As amended, the Predecessor EIP permits Predecessor
to grant awards allowing for the issuance of up to
4,888,402
shares of Predecessor's common stock. On close of the Merger, outstanding
awards issued for the Predecessor EIP were converted to options to purchase a number of shares of the Company's Common Stock equal
to the number of Predecessor shares multiplied by the Merger conversion ratio of
0.064452
at a price of the Predecessor option strike
price divided by the Merger conversion ratio. The Predecessor EIP was then cancelled.
Predecessor's Stock option activity for
the period from December 31, 2023 through February 14, 2024 and the Company's stock option activity for the period from February
14, 2024 through September 30, 2024, was as follows:
Outstanding
Shares
Weighted
Average
Exercise
Price Per
Share
Weighted
Average
Remaining
Contractual
Life
(in years)
Balance, December 31, 2023 (Predecessor)
782,499
$
0.27
6.86
Options cancelled (Predecessor)
(
782,499
)
$
0.27
Balance, February 14, 2024 (Predecessor)
-
$
-
-
Balance, February 14, 2024 (Predecessor)
-
$
-
-
Options granted (Successor)
5,039,721
$
1.68
Options Cancelled (Successor)
(
2,382,235
)
$
1.73
Balance, September 30, 2024 (Successor)
2,657,486
$
1.63
9.51
The intrinsic value of Predecessor options exercised
during the nine-month period ended September 30, 2023 was $
9,485
. No options were exercised in the nine-month period ended September 30,
2024.
On March 25, 2024, the Company's Board adopted,
and its stockholders approved, an Equity Incentive Plan (the "2024 Plan"). The 2024 Plan provides for the granting of stock
options, restricted stock and stock appreciation rights to employees, members of the Board of Directors and non-employee consultants.
Stock options granted generally expire
ten years
after their original date of grant and generally vest
25
% on the first anniversary
of the grant, then monthly to the fourth anniversary of the date of grant, subject to continued service through the applicable vesting
date. The plan allows for the issuance of up to
5,172,590
shares of Common Stock. On April 30, 2024, the 2024 Plan was amended to
include
2,000,000
additional shares of Common Stock in the pool available for future grant awards.
The Company estimated the fair value of stock
options granted during the period February 14, 2024 through September 30, 2024 using Black-Scholes with the following weighted average
assumptions:
●
The
Common Stock expected dividend yield assumption of
0.0
% is based on the expectation of no dividend payouts to Common Stock.
●
The
risk-free interest rate assumption is based on the U.S. Department of Treasury instruments whose term was most consistent with the expected
life of the Company's stock options.
●
The
expected stock price volatility assumption was determined by examining the historical volatilities for industry peers, as the Company
does not have sufficient public trading history for the Company's Common Stock. The Company will continue to analyze the historical
stock price volatility and expected term assumption as more historical price data for the Company's Common Stock becomes available.
●
The
expected lives of the Company's stock options are estimated based on the type of award issued using approaches that do not rely
on the historical data of the Company, as management has concluded there is insufficient data to provide a reasonable forward-looking
estimate. The expected life of an incentive stock option is estimated using the simplified method described in Staff Accounting Bulletin
Topic 14 – Share-Based Payment. All incentive stock options awarded by the Company have terms consistent with this approach, which
is to calculate the weighted average midpoint between the vesting date of each vesting tranche and the termination date of the option.
Non-qualified stock options are valued using the contractual life as the expected term.
F-
24
For the period from February 14, 2024 through
September 30, 2024, the Company recorded stock-based compensation expense of $
1.9
million, of which $
1.0
million was related to research
and development and $
0.9
million was related to general and administrative. For the period from January 1, 2024 through February 13, 2024,
Predecessor recorded an immaterial amount of stock-based compensation expense. For the three-month period ended September 30, 2024, the
Company recorded stock-based compensation expense of $
0.4
million, of which $
0.1
million was related to research and development and $
0.3
million was related to general and administrative.
For the nine-month period ended September 30,
2023, Predecessor recorded stock-based compensation expense of $
0.08
million, of which $
0.07
million was related to research and development
and $
0.01
million was related to general and administrative. For the three-month period ended September 30, 2023, the Predecessor recorded
stock-based compensation expense of $
0.02
million, of which $
0.02
million was related to research and development and approximately $
0
was related to general and administrative.
As of September 30, 2024, the Company had $
1.5
million of unamortized stock-based compensation cost related to unvested stock options, which is expected to be recognized over a weighted
average period of
1.7
years. The weighted average grant date calculated fair value per share of the Company's options granted during
the period from February 14, 2024, through September 30, 2024, was $
1.02
.
There were no Predecessor options granted in the
nine-month period ended September 30, 2023.
NOTE
11 – 401(k) RETIREMENT SAVINGS PLAN
The Company sponsors a 401(k) defined contribution
plan covering eligible employees who elect to participate. The Company is allowed to make discretionary profit sharing and 401(k) matching
contributions as defined in the plan and as approved by the Board of Directors. The Company's contributions for the period from
February 14, 2024 through September 30, 2024, was $
40,459
and Predecessor contributions during the period from January 1, 2024 through
February 13, 2024 was $
8,657
. The Company's contributions for the three-months ended September 30, 2024 was $
16,700
. The Predecessor
made
no
contributions in the three- or nine-months ended September 30, 2023.
NOTE
12 – Subsequent Events
On October 1, 2024, the Company's Board
of Directors granted Directors and Officers options to purchase up to
4.5
million shares of common stock for $
0.10
per share. The grants
have various vesting conditions, including time-based and performance-based terms. Additionally, on October 1, 2024, the exercise price
of all other outstanding options granted under the 2024 Plan was adjusted to $
0.10
per share, with all other terms of the original grant
to remain without adjustment.
On October 23, 2024, the trading price for CERo
common stock closed under $
0.10
and was the tenth consecutive trading day to do so. On October 24, 2024, the Company received letter from
the staff at The Nasdaq Global Market ("Nasdaq") notifying the Company that, because its Common Stock had a closing bid price
of $
0.10
or less for
ten
consecutive trading days, it was no longer eligible to rely upon the 180-day cure period that commenced when
the Company received notice in July 2024 that the closing bid price was below $
1.00
for
ten
consecutive trading days and was scheduled
to expire on
January 15, 2025
. In addition, on October 30, 2024, the Company received a letter from the staff at Nasdaq notifying the
Company that it had not regained compliance with the continued listing requirement to maintain a minimum market value of $
50,000,000
for
its listed securities within the 180-day compliance period granted by Nasdaq in May 2024. Each such deficiency results in the commencement
of delisting proceedings. However, the Company has requested a hearing from Nasdaq and plans to submit a plan to regain compliance with
the listing requirements at such hearing.
On November 8, 2024, the Company consummated a
purchase agreement with Keystone pursuant to which we may sell and issue, and Keystone is obligated to purchase, up to $
20.6
million of
shares of Common Stock, subject to certain market conditions. The price of the shares purchased by Keystone under the ELOC is
90
% of various
volume-weighted average price ("VWAP") and closing price-based formulae, and requires a waiver, should the selling price be
below $
0.01
per share.
On November 11. 2024, the Company's stockholders
approved a reverse stock split ranging from
1:25
to
1:150
. On November 15, 2024, the Board of Directors authorized a reverse stock split
ratio of
1:40
, such reverse split is anticipated to be effective on or about December 2, 2024. Although such reverse stock split is expected
to enable regaining compliance with the Bid Price Requirement, it is not intended to contribute to regaining compliance with the other
Requirements.
F-
25
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Stockholders and Board of Directors of
Phoenix Biotech Acquisition Corp.
Opinion on the Financial Statements
We have audited the accompanying balance sheets
of Phoenix Biotech Acquisition Corp. (the "Company") as of December 31, 2023 and 2022, and the related statements of operations,
changes in stockholders' deficit and cash flows for each of the years in the two-year period ended December 31, 2023, and the related
notes (collectively, the "financial statements"). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows
for each of the years in the two-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the
United States of America.
Substantial Doubt About the Company's
Ability to Continue as a Going Concern
The accompanying financial statements have been
prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company's
expected working capital needs to fund its combined operations and meet obligations as a result of the acquisition of CERo Therapeutics,
Inc. in February 2024, raise substantial doubt about its ability to continue as a going concern. The Company's continued operations
are dependent upon its ability to raise additional funds through debt or equity financing. There can be no assurances that the Company
will be able to secure any such additional financing on acceptable terms and conditions, or at all. Management's plan in regard
to these matters is described in Note 1. The financial statements do not include any adjustments that might result from the outcome of
this uncertainty.
Basis for Opinion
These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding
of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Citrin Cooperman & Company, LLP
We have served as the Company's auditor
since 2021.
New York, New York
April 2, 2024
F-
26
PHOENIX BIOTECH ACQUISITION CORP.
BALANCE SHEETS
December 31,
2023
2022
ASSETS
CURRENT ASSETS
Cash
$
96,873
$
475,870
Prepaid expenses and other assets
27,426
225,188
Money market funds held in Trust Account
8,436,311
—
Restricted cash held in Trust Account
—
41,665,974
TOTAL ASSETS
$
8,560,610
$
42,367,032
LIABILITIES, REDEEMABLE COMMON STOCK, AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses
$
3,535,084
$
1,653,120
Income tax payable
23,633
599,159
Shareholder redemption liability
—
27,842,747
Working capital loan – related party
1,555,000
650,000
Excise tax payable
56,389
—
Due to Affiliate
3,315
3,315
Total current liabilities
5,173,421
30,748,341
LONG TERM LIABILITIES
Deferred underwriting fee payable
9,150,000
9,150,000
Total liabilities
14,323,421
39,898,341
COMMITMENTS AND CONTINGENCIES
REDEEMABLE COMMON STOCK
Class A Common stock subject to possible redemption, $
0.0001
par value,
764,957
and
1,288,298
shares at redemption value of $
11.03
and $
10.26
per share as of December 31, 2023 and 2022, respectively
8,436,311
13,468,845
STOCKHOLDERS' DEFICIT
Preferred stock, $
0.0001
par value;
1,000,000
shares authorized;
none
issued or outstanding
—
—
Class A common stock; $
0.0001
par value;
60,000,000
shares authorized;
5,481,250
and
885,000
shares issued and outstanding (excluding 764,957 and 1,288,298 shares subject to possible redemption) as of December 31, 2023 and 2022, respectively
547
88
Class B common stock; $
0.0001
par value;
10,000,000
shares authorized;
0
and
4,596,250
shares issued and outstanding as of December 31, 2023 and 2022, respectively
—
459
Additional paid-in capital
—
—
Accumulated deficit
(
14,199,669
)
(
11,000,701
)
Total stockholders' deficit
(
14,199,122
)
(
11,000,154
)
TOTAL LIABILITIES, REDEEMABLE COMMON STOCK, AND STOCKHOLDERS' DEFICIT
$
8,560,610
$
42,367,032
The accompanying notes are an integral part
of the financial statements.
F-
27
PHOENIX BIOTECH ACQUISITION CORP.
STATEMENTS OF OPERATIONS
For the Year Ended
December 31,
2023
2022
OPERATING EXPENSES
General and administrative
$
2,892,935
$
2,841,391
Franchise tax
40,050
64,050
Loss from operations
(
2,932,985
)
(
2,905,441
)
Other income:
Interest income earned on marketable securities held in Trust Account
491,571
2,836,864
Total other income
491,571
2,836,864
Loss before provision for income taxes
(
2,441,414
)
(
68,577
)
Provision for income taxes
(
94,819
)
(
599,159
)
Net loss
$
(
2,536,233
)
$
(
667,736
)
Weighted average shares outstanding of Class A common stock
4,224,247
17,896,428
Basic and diluted net loss per share, Class A common stock
$
(
0.39
)
$
(
0.03
)
Weighted average shares outstanding of Class B common stock
2,304,421
4,596,250
Basic and diluted net loss per share, Class B common stock
$
(
0.39
)
$
(
0.03
)
The accompanying notes are an integral part
of the financial statements.
F-
28
PHOENIX BIOTECH ACQUISITION CORP.
STATEMENTS OF CHANGES IN STOCKHOLDERS'
DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 2023 AND 2022
Common stock
Additional
Total
Class A
Class B
paid-in
Accumulated
Stockholders'
Shares
Amount
Shares
Amount
capital
deficit
Deficit
Balance, December 31, 2021
885,000
$
88
4,596,250
$
459
$
—
$
(
7,670,412
)
$
(
7,669,865
)
Accretion for Class A Common Stock Subject to Redemption
—
—
—
—
—
(
2,662,553
)
(
2,662,553
)
Net loss
—
—
—
—
—
(
667,736
)
(
667,736
)
Balance, December 31, 2022
885,000
88
4,596,250
459
—
(
11,000,701
)
(
11,000,154
)
Accretion for Class A Common Stock Subject to Redemption
—
—
—
—
—
(
606,346
)
(
606,346
)
Excise tax liability accrued for Class A common stock redemptions
—
—
—
—
—
(
56,389
)
(
56,389
)
Conversion of Class B common stock to Class A common stock
4,596,250
459
(
4,596,250
)
(
459
)
—
—
—
Net loss
—
—
—
—
—
(
2,536,233
)
(
2,536,233
)
Balance, December 31, 2023
5,481,250
$
547
—
$
—
$
—
$
(
14,199,669
)
$
(
14,199,122
)
The accompanying notes are an integral part
of the financial statements.
F-
29
PHOENIX BIOTECH ACQUISITION CORP.
STATEMENTS OF CASH FLOWS
For the Year Ended
December 31,
2023
2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
$
(
2,536,233
)
$
(
667,736
)
Adjustments to reconcile net loss to net cash used in operating activities:
Interest income earned on marketable securities held in Trust Account
(
491,571
)
(
2,836,864
)
Changes in operating assets and liabilities:
Prepaid expenses and other assets
197,762
254,831
Income tax payable
(
575,526
)
599,159
Accounts payable and accrued expenses
1,881,964
1,638,687
Franchise tax payable
-
(
80,324
)
Net cash used in operating activities
(
1,523,604
)
(
1,092,247
)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash withdrawn from Trust Account for taxes
752,300
144,544
Investment of restricted cash into marketable securities in the Trust Account
(
14,335,919
)
(
325,000
)
Cash withdrawn from Trust Account in connection with Class A common stock redemption
5,638,879
181,019,852
Net cash provided by investing activities
(
7,944,740
)
180,839,396
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from promissory note - related party
905,000
650,000
Redemption of Class A common stock
(
33,481,627
)
(
139,353,878
)
Net cash used in financing activities
(
32,576,627
)
(
138,703,878
)
NET CHANGE IN CASH AND RESTRICTED CASH
(
42,044,971
)
41,043,271
CASH AND RESTRICTED CASH, BEGINNING OF PERIOD
42,141,844
1,098,573
CASH AND RESTRICTED CASH, END OF PERIOD
$
96,873
$
42,141,844
Supplemental cash flow information:
Cash paid for income taxes
$
670,345
$
—
Supplemental disclosure of noncash activities:
Accretion of Class A common stock subject to possible redemption
$
606,346
$
2,662,553
Shareholder redemption liability
$
—
$
27,842,747
Conversion of Class B common to Class A common
$
(
459
)
$
—
Excise tax liability accrued for Class A common stock redemptions
$
56,389
$
—
The accompanying notes are an integral part
of the financial statements.
F-
30
PHOENIX BIOTECH ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2023
Note 1 — Description of Organization and Business Operations
and Liquidity
Phoenix Biotech Acquisition
Corp. (the "Company") was incorporated in Delaware on June 8, 2021. The Company was formed for the purpose of effecting a
merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination with one or more businesses
(a "business combination").
The Company is not limited
to a particular industry or geographic region for purposes of consummating a business combination. The Company is an early stage and emerging
growth company and, as such, the Company is subject to all of the risks associated with early stage and emerging growth companies.
As of December 31, 2023,
the Company had not commenced any operations. All activity through December 31, 2023 relates to the Company's formation and initial
public offering ("IPO"), which is described below and, since the offering, the search for a prospective initial business combination.
The Company will not generate any operating revenues until after the completion of its initial business combination, at the earliest.
The Company generates non-operating income in the form of interest income earned on investments from the proceeds derived from the IPO
and placed in the Trust Account (defined below). The registration statement for the Company's IPO was declared effective on October
5, 2021. On October 8, 2021, the Company consummated the IPO of
15,500,000
units ("Units") (with respect to the Class A common
stock included in the Units being offered (the "Public Shares")) at $
10.00
per Unit generating gross proceeds of $
155,000,000
,
which is discussed in Note 3. The Company has selected December 31 as its fiscal year end.
Simultaneously with the closing
of the IPO, the Company consummated the sale of
845,000
units ("Private Placement Units") (with respect to the Class A common
stock included in the Private Placement Units offered, the "Private Placement Shares") at a price of $
10.00
per Private Placement
Unit in a private placement to the Company's sponsor, Phoenix Biotech Sponsor, LLC (the "Sponsor"), Cantor Fitzgerald
& Co. ("Cantor") and Cohen & Company Capital Markets, a division of J.V.B. Financial Group, LLC ("CCM"),
generating gross proceeds of $
8,450,000
, which is described in Note 4.
Simultaneously with the closing
of the IPO, the Company consummated the sale of
2,000,000
additional Units upon receiving notice of the underwriter's election to
partially exercise its overallotment option ("Overallotment Units"), generating additional gross proceeds of $
20,000,000
and
incurring additional offering costs of $
1,400,000
in underwriting fees, all of which are deferred until the completion of the Company's
initial business combination. Simultaneously with the exercise of the overallotment, the Company consummated the Private Placement of
an additional
40,000
Private Placement Units to the Sponsor and CCM, generating gross proceeds of $
400,000
.
Offering costs for the IPO
and exercise of the overallotment option amounted to $
12,729,318
, consisting of $
2,635,000
of underwriting fees, $
9,150,000
of deferred
underwriting fees payable (which are held in the Trust Account (defined below)) and $
944,318
of other costs. As described in Note 6, the
$
9,150,000
of deferred underwriting fees payable is contingent upon the consummation of a business combination by January 8, 2024, subject
to the terms of the underwriting agreement.
Following the closing of
the IPO, $
178,500,000
($
10.20
per Unit) from the net proceeds of the sale of the Units in the IPO, the Overallotment Units and the Private
Placement Units was placed in a trust account ("Trust Account") and invested in U.S. government securities, within the meaning
set forth in Section 2(a)(16) of the Investment Company Act of 1940, as amended (the "Investment Company Act"), with a maturity
of 185 days or less or in money market funds meeting the conditions of the Investment Company Act, as determined by the Company, until
the earlier of: (i) the completion of a business combination and (ii) the distribution of the Trust Account, as described below.
The Company's management
has broad discretion with respect to the specific application of the net proceeds of the IPO and the sale of the Private Placement Units,
although substantially all of the net proceeds are intended to be applied generally toward consummating a business combination. There
is no assurance that the Company will be able to complete a business combination successfully. The Company must complete one or more initial
business combinations having an aggregate fair market value of at least
80
% of the assets held in the Trust Account (excluding the deferred
underwriting commissions and taxes payable on income earned on the Trust Account) at the time of the agreement to enter into the initial
business combination. However, the Company will only complete a business combination if the post-transaction company owns or acquires
50
% or more of the outstanding voting securities of the target or otherwise acquires a controlling interest in the target sufficient for
it not to be required to register as an investment company under the Investment Company Act. There is no assurance the Company will be
able to successfully effect a business combination.
The Company will provide
the holders of the outstanding Public Shares (the "Public Stockholders") with the opportunity to redeem all or a portion of
their Public Shares upon the completion of a business combination either (i) in connection with a stockholder meeting called to approve
the business combination or (ii) by means of a tender offer. The decision as to whether the Company will seek stockholder approval of
a business combination or conduct a tender offer will be made by the Company. The Public Stockholders will be entitled to redeem their
Public Shares for a pro rata portion of the amount then in the Trust Account (initially $
10.20
per Public Share, plus any pro rata interest
then in the Trust Account, net of taxes payable). There will be no redemption rights with respect to the Company's warrants.
F-
31
PHOENIX BIOTECH ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2023
All of the Public Shares
contain a redemption feature which allows for the redemption of such Public Shares in connection with the Company's liquidation,
if there is a stockholder vote or tender offer in connection with the Company's business combination and in connection with certain
amendments to the Company's amended and restated certificate of incorporation (the "Charter"). In accordance with the
rules of the U.S. Securities and Exchange Commission (the "SEC") and its guidance on redeemable equity instruments, which
has been codified in Accounting Standards Codification ("ASC") 480-10-S99, redemption provisions not solely within the control
of a company require common stock subject to redemption to be classified outside of permanent equity. Given that the Public Shares were
issued with other freestanding instruments (i.e., public warrants), the initial carrying value of Class A common stock classified as temporary
equity will be the allocated proceeds determined in accordance with ASC 470-20. The Class A common stock is subject to ASC 480-10-S99.
If it is probable that the equity instrument will become redeemable, the Company has the option to either (i) accrete changes in the redemption
value over the period from the date of issuance (or from the date that it becomes probable that the instrument will become redeemable,
if later) to the earliest redemption date of the instrument or (ii) recognize changes in the redemption value immediately as they occur
and adjust the carrying amount of the instrument to equal the redemption value at the end of each reporting period. The Company has elected
to recognize the changes immediately. The accretion or remeasurement will be treated as a deemed dividend (i.e., a reduction to retained
earnings, or in the absence of retained earnings, additional paid-in capital). While redemptions cannot cause the Company's net
tangible assets to fall below $
5,000,001
, the Public Shares are redeemable and are classified as such on the balance sheet until such
date that a redemption event takes place.
Redemptions of the Company's
Public Shares may be subject to the satisfaction of conditions, including minimum cash conditions, pursuant to an agreement relating to
a business combination. If the Company seeks stockholder approval of the business combination, the Company will proceed with a business
combination if a majority of the shares voted are voted in favor of the business combination, or such other vote as required by law or
stock exchange rule. If a stockholder vote is not required by applicable law or stock exchange listing requirements and the Company does
not decide to hold a stockholder vote for business or other reasons, the Company will, pursuant to its Charter, conduct the redemptions
pursuant to the tender offer rules of the SEC and file tender offer documents with the SEC prior to completing a business combination.
If, however, stockholder approval of the transaction is required by applicable law or stock exchange listing requirements, or the Company
decides to obtain stockholder approval for business or other reasons, the Company will offer to redeem shares in conjunction with a proxy
solicitation pursuant to the proxy rules and not pursuant to the tender offer rules. If the Company seeks stockholder approval in connection
with a business combination, the Sponsor has agreed to vote its Founder Shares (as defined in Note 5), Private Placement Shares and any
Public Shares purchased during or after the IPO in favor of approving a business combination. Additionally, each Public Stockholder may
elect to redeem their Public Shares without voting, and if they do vote, irrespective of whether they vote for or against the proposed
transaction.
Notwithstanding the foregoing,
the Charter provides that a Public Stockholder, together with any affiliate of such stockholder or any other person with whom such stockholder
is acting in concert or as a "group" (as defined under Section 13 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), will be restricted from redeeming its shares with respect to more than an aggregate of
20
% or more of the
Class A common stock sold in the IPO, without the prior consent of the Company.
The Company's Sponsor,
officers and directors (the "Initial Stockholders") have agreed not to propose an amendment to the Charter that would affect
the substance or timing of the Company's obligation to redeem
100
% of its Public Shares if the Company does not complete a business
combination within the business combination period, unless the Company provides the Public Stockholders with the opportunity to redeem
their shares of Class A common stock in conjunction with any such amendment.
On December 16, 2022, the
Company held a special meeting of its stockholders (the "First Special Meeting"). At the Special Meeting, the Company's
stockholders approved an amendment (the "First IMTA Amendment") to the Company's Investment Management Trust Agreement
(the "IMTA"), dated October 5, 2021, with Continental Stock Transfer & Trust Company ("CST"), as trustee,
and an amendment to the Company's Charter (the "First Charter Amendment"), to extend the business combination period
up to three times for three months each time (the "First Extension").
In connection with the First
Special Meeting, the Sponsor agreed that if the First Charter Amendment and the First IMTA Amendment were approved at the First Special
Meeting, the Sponsor, or one or more of its affiliates, members or third-party designees (in such capacity, the "Lender"),
would lend to the Company up to $
1,500,000
to be deposited into the Trust Account established in connection with the IPO. Accordingly,
on December 20, 2022, the Company issued an unsecured promissory note in the principal amount of $
1,500,000
(the "Promissory Note")
to the Lender, pursuant to which the Lender agreed to loan to the Company up to $
1,500,000
in connection with the extension of the date
by which the Company has to consummate an initial Business Combination.
In connection with the approval
of the Extension, holders of
16,211,702
Public Shares exercised redemption rights. As a result, following the satisfaction of such redemptions,
as of December 31, 2022, the Company had
2,173,298
shares of Class A common stock outstanding, of which (i)
1,288,298
were Public Shares,
which were entitled to receive a pro rata portion of the remaining funds in the Trust Account in connection with its initial Business
Combination, a liquidation or certain other events, and (ii)
885,000
were Private Placement Shares, which did not have redemption rights.
F-
32
PHOENIX BIOTECH ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2023
On March 31, 2023, May 8,
2023 and June 30, 2023, the Company deposited $
100,000
, $
125,000
and $
150,000
into the Trust Account in connection with the First Extension.
On July 7, 2023, the Company
held a special meeting of its stockholders (the "Second Special Meeting"). At the Second Special Meeting, the Company's
stockholders approved an amendment to the IMTA, as amended by the IMTA Amendment (the "Second IMTA Amendment"), and an amendment
to the Company's Charter, as amended by the Charter Amendment (the "Second Charter Amendment"), to extend the business
combination period for up to six times for one month each time (the "Second Extension").
On July 7, 2023, July 28,
2023, September 1, 2023, October 4, 2023, November 2, 2023 and November 30, 2023, the Company deposited $
37,052
, $
8,846
, $
22,949
, $
22,949
,
$
22,949
and $
22,949
into the Trust Account in connection with the Second Extension.
As a result of the deposits
described above, such payments and accrual of interest, the balance in the Trust Account as of December 31, 2023 is approximately $
8.4
million.
If the Company is unable
to complete a business combination by
January 8, 2024
(as extended) (the "business combination period"), the Company will
(i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business
days thereafter, redeem the Public Shares, at a per-share price, payable in cash, equal to the aggregate amount then on deposit in the
Trust Account including interest earned on the funds held in the Trust Account and not previously released to us to pay the Company's
franchise and income taxes (less up to $
100,000
of interest to pay dissolution expenses), divided by the number of then outstanding Public
Shares, which redemption will completely extinguish Public Stockholders' rights as stockholders (including the right to receive
further liquidating distributions, if any), subject to applicable law, and (iii) as promptly as reasonably possible following such redemption,
subject to the approval of the Company's remaining stockholders and the Company's board of directors, dissolve and liquidate,
subject in each case to the Company's obligations under Delaware law to provide for claims of creditors and the requirements of
other applicable law.
The Initial Stockholders
have agreed to waive their liquidation rights with respect to the Founder Shares and Private Placement Shares if the Company fails to
complete a business combination within the business combination period. However, if the Initial Stockholders should acquire Public Shares
in or after the IPO, they will be entitled to liquidating distributions from the Trust Account with respect to such Public Shares if the
Company fails to complete a business combination within the business combination period. The underwriter has agreed to waive its rights
to the deferred underwriting commission (see Note 6) held in the Trust Account in the event the Company does not complete a business combination
within the business combination period, and, in such event, such amounts will be included with the other funds held in the Trust Account
that will be available to fund the redemption of the Public Shares. In the event of such distribution, it is possible that the per share
value of the residual assets remaining available for distribution (including Trust Account assets) will be only $
10.20
per share held
in the Trust Account. In order to protect the amounts held in the Trust Account, the Sponsor has agreed to be liable to the Company if
and to the extent any claims by a vendor for services rendered or products sold to the Company, or a prospective target business with
which the Company has discussed entering into a transaction agreement, reduce the amount of funds in the Trust Account. This liability
will not apply with respect to any claims by a third party who executed a waiver of any right, title, interest or claim of any kind in
or to any monies held in the Trust Account or to any claims under the Company's indemnity of the underwriter of the IPO against
certain liabilities, including liabilities under the Securities Act of 1933, as amended (the "Securities Act"). Moreover,
in the event that an executed waiver is deemed to be unenforceable against a third party, the Sponsor will not be responsible to the extent
of any liability for such third-party claims.
The Company will seek to
reduce the possibility that the Sponsor will have to indemnify the Trust Account due to claims of creditors by endeavoring to have all
vendors, service providers (except the Company's independent registered public accounting firm), prospective target businesses or
other entities with which the Company does business, execute agreements waiving any right, title, interest or claim of any kind in or
to monies held in the Trust Account.
Business Combination Agreement with CERo Therapeutics,
Inc. ("CERo")
On June 4, 2023, the Company entered into
a business combination agreement and plan of reorganization (the "Business Combination Agreement"), by and among the Company,
PBCE Merger Sub, Inc., a Delaware corporation ("Merger Sub"), and CERo. Immediately after the merger, the Company changed
its name from Phoenix Biotech Acquisition Corporation to CERo Therapeutics Holdings, Inc.
F-
33
PHOENIX BIOTECH ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2023
At the effective time (the
"Effective Time") of the of the merger between Merger Sub and CERo (the "Business Combination"), (i) each
outstanding share of CERo common stock, par value $
0.0001
per share (the "CERo common stock"), will be cancelled and converted
into (a) the right to receive a number of shares of Class A common stock, par value $
0.0001
per share ("Class A common
stock"), equal to $
50,000,000
,
minus
the Aggregate Liquidation Preference (as defined in the Business Combination
Agreement),
divided
by the Fully Diluted Company Capitalization (as defined in the Business Combination Agreement),
divided
by
$
10.00
(the "Exchange Ratio") and (b) the right to receive a portion of up to
2,200,000
additional shares of Class A
common stock if certain trading price hurdles are achieved or a Change of Control (as defined in the Business Combination Agreement) occurs
within four years after the Closing ("Earnout Shares"); (ii) each outstanding option to purchase CERo common stock (each,
a "CERo option") will be converted into an option to purchase a number of shares of Class A common stock, equal to (A) the
number of shares of CERo common stock subject to such option immediately prior to the Effective Time,
multiplied
by (B) the
Exchange Ratio, at an exercise price per share equal to the current exercise price per share for such option divided by the Exchange Ratio;
in each case, rounded down to the nearest whole share, and rounded up to the nearest whole cent in the case of the exercise price of the
CERo options; (iii) each outstanding share of CERo preferred stock, par value $
0.0001
per share (the "CERo preferred stock"),
will be converted into a number of shares of Class A common stock, equal to the number of shares of Class A common stock obtained
by
dividing
the liquidation preference thereof by $
10.00
and the contingent right to receive such holder's Earn-Out Pro
Rata Portion (as defined in the Business Combination Agreement), and (iv) each warrant to purchase CERo preferred stock (each, a
"CERo warrant") outstanding as of immediately prior to the Effective Time will be converted into a warrant to acquire a number
of shares of Class A common stock equal to the number of shares of CERo preferred stock subject to the corresponding warrant immediately
prior to the Effective Time,
multiplied
by the Aggregate Liquidation Preference of such underlying shares of CERo preferred
stock, and
divided
by $
10.00
, with the exercise price per share for such warrant equal to (A) the current aggregate
exercise price of such warrant (the current exercise price per share of CERo preferred stock applicable to the corresponding warrant immediately
prior to the Effective Time,
multiplied
by the number of shares of CERo preferred stock issuable upon exercise thereof),
divided
by
(B) the number of shares of Class A common stock issuable upon exercise thereof. Subject to certain exceptions, such terms and
conditions applicable to a CERo Therapeutics Holdings, Inc. ("New CERo") warrant will be the same terms and conditions as
were applicable to a CERo warrant immediately prior to the Effective Time. The Company will issue an aggregate of approximately
5.0
million
shares of Class A common stock to the holders of CERo common stock and CERo preferred stock as consideration in the Business Combination.
NASDAQ Notice
On April 3, 2023, the Company
received a letter (the "Letter") from the staff at The Nasdaq Global Market ("Nasdaq") notifying the Company that,
for the 30 consecutive trading days prior to the date of the Letter, the Company's common stock had traded at a value below the
minimum $
50,000,000
"Market Value of Listed Securities" ("MVLS") requirement set forth in Nasdaq Listing Rule
5450(b)(2)(A), which is required for continued listing of the Company's common stock on Nasdaq. The Letter is only a notification
of deficiency, not of imminent delisting, and has no current effect on the listing or trading of the Company's securities on Nasdaq.
In order to bring the Company
into compliance with the MVLS requirement, on July 3, 2023, the Sponsor elected to effect the Conversion. As of the date hereof, there
are
6,246,207
shares of Class A common stock and
no
shares of Class B common stock issued and outstanding and entitled to vote.
On September 7, 2023, the
Company received a written notice (the "Notice") from the Nasdaq Listing Qualifications Department of Nasdaq indicating that
the Company was not in compliance with Listing Rule 5450(a)(2), which requires the Company to have at least 400 public holders for continued
listing on the Nasdaq Global Market (the "Minimum Public Holders Rule"). The Notice is only a notification of deficiency,
not of imminent delisting, and has no current effect on the listing or trading of the Company's securities on Nasdaq Global Market.
The Notice states that the Company has 45 calendar days to submit a plan to regain compliance with the Minimum Public Holders Rule. The
Company has submitted a plan to regain compliance with the Minimum Public Holders Rule. If Nasdaq accepts the Company's plan, Nasdaq
may grant the Company an extension of up to 180 calendar days from the date of the Notice to evidence compliance with the Minimum Public
Holders Rule. If Nasdaq does not accept the Company's plan, the Company will have the opportunity to appeal the decision in front
of a Nasdaq Hearings Panel.
The MVLS deficiency was cured
by the conversion of the Class B common stock into Class A common stock because the Class A common stock held by Sponsor count towards
satisfying such requirement. The Company submitted a "plan of compliance" to NASDAQ indicating that the Company was aiming
to be able to cure the deficiency upon closing of the Business Combination. Nasdaq has not responded.
F-
34
PHOENIX BIOTECH ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2023
Inflation Reduction Act of 2022 (the "IR
Act")
On August 16, 2022, the Inflation
Reduction Act of 2022 (the "IR Act") was signed into federal law. The IR Act provides for, among other things, a new U.S.
federal
1
% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries
of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation
itself, not its stockholders from which shares are repurchased. The amount of the excise tax is generally
1
% of the fair market value
of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations
are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the
same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the "Treasury")
has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.
Any redemption or other repurchase
that occurs after December 31, 2022, in connection with a business combination, extension vote or otherwise, may be subject to the excise
tax. Whether and to what extent the Company would be subject to the excise tax in connection with a business combination, extension vote
or otherwise would depend on a number of factors, including (i) the fair market value of the redemptions and repurchases in connection
with the business combination, extension or otherwise, (ii) the structure of a business combination, (iii) the nature and amount of any
"PIPE" or other equity issuances in connection with a business combination (or otherwise issued not in connection with a business
combination but issued within the same taxable year of a business combination) and (iv) the content of regulations and other guidance
from the Treasury. In addition, because the excise tax would be payable by the Company and not by the redeeming holder, the mechanics
of any required payment of the excise tax have not been determined. The foregoing could cause a reduction in the cash available on hand
to complete a business combination and in the Company's ability to complete a business combination.
On July 17, 2023, the Company
redeemed
523,341
shares of Class A common stock tendered for redemption by the Public Stockholders for a total redemption amount of $
5,638,879
in connection with the implementation of the Extension. The Company evaluated the classification and accounting of the stock redemption
under ASC 450, "Contingencies" to determine whether the Company should currently recognize an excise tax obligation associated
therewith. ASC 450 states that when a loss contingency exists the likelihood that the future event(s) will confirm the loss or impairment
of an asset, or the incurrence of a liability can range from probable to remote. Contingent liability must be reviewed at each reporting
period to determine appropriate treatment. The Company evaluated whether a United States excise tax obligation should be recognized currently
related to the stock redemption and concluded that this obligation should be recognized. As of December 31, 2023, the Company recorded
$
56,389
of excise tax liability calculated as
1
% of shares redeemed on July 17, 2023. Any reduction to this liability resulting from either
a subsequent stock issuance or an event giving rise to an exception that occurs within this tax year, will be recognized in the period
(including an interim period) that such stock issuance or event giving rise to an exception occurs.
Liquidity and Going Concern
As of December 31, 2023,
the Company had $
96,873
in its operating bank accounts, $
8,436,311
in marketable securities held in the Trust Account to be used for a
business combination or to repurchase or redeem its Public Shares in connection therewith and a working capital deficit of $
5,049,122
.
On May 9, 2023, the Company
received a notice from the IRS stating an additional $
182,308
of federal income taxes were due by May 22, 2023. The Company made this
payment on June 23, 2023.
The accompanying financial
statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets
and satisfaction of liabilities in the normal course of business. The Company's ability to continue as a going concern is dependent
on its ability to raise additional capital to fund its research and development ("R&D") activities and meet its obligations
on a timely basis. Since inception, the Company has incurred net losses and operating cash flow deficits, resulting in an accumulated
deficit of $
14.2
million as of December 31, 2023. On February 14, 2024, the Company acquired the assets of CERo Therapeutics, Inc.,
closed a private placement with gross proceeds of $
9.98
million, and assumed the R&D operations of CERo Therapeutics. Additional funds
are necessary to maintain current operations and to continue R&D activities. However, there can be no assurance that sufficient funding
will be available to allow the Company to successfully continue its R&D activities and planned regulatory filings with the Food and
Drug Administration ("FDA"). If the Company is unable to obtain necessary funds, significant reductions in spending and the
delay or cancellation of planned activities may be necessary. These actions would have a material adverse effect on the Company's
business, results of operations, and prospects. These conditions raise substantial doubt about the Company's ability to continue
as a going concern within one year from the date these financial statements are issued. The accompanying financial statements do not include
any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities
that might result from the outcome of this uncertainty.
F-
35
PHOENIX BIOTECH ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2023
Note 2 — Summary of Significant Accounting
Policies
Basis of Presentation
The accompanying financial
statements are presented in accordance with accounting principles generally accepted in the United States of America ("GAAP")
and pursuant to the rules and regulations of the SEC.
Reclassifications
Certain prior year amounts
have been reclassified due to an immaterial correction of an error and for consistency with the current period presentation. These reclassifications
had no effect on the reported results of operations. An adjustment for $
244,777
has been made to Class A common stock subject to
possible redemption and Accumulated deficit as of December 31, 2022 to correct the total amount redeemable to stockholders.
In the Form 10-Q for three
months ended March 31, 2023, the Company discovered an error in the Statement of Cash Flows for the presentation of restricted cash. The
error was not corrected and persisted in the statements of cash flows in the quarterly reports on 10-Q for the three months ended June
30, 2023 and September 30, 2023. These errors had no impact on the balance sheets or the statements of operations in those periods. This
error is corrected in the statement of cash flows in the Company's December 31, 2023 audited financial statements.
Emerging Growth Company
The Company is an "emerging
growth company," as defined in Section 2(a) of the Securities Act, as modified by the Jumpstart Our Business Startups Act of 2012
(the "JOBS Act"), and it may take advantage of certain exemptions from various reporting requirements that are applicable
to other public companies that are not emerging growth companies including, but not limited to, not being required to comply with the
independent registered public accounting firm attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations
regarding executive compensation in its periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding
advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
Further, Section 102(b)(1)
of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until
private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class
of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS
Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to non-emerging
growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period
which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company,
as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard.
This may make comparison of the Company's financial statements with another public company which is neither an emerging growth company
nor an emerging growth company which has opted out of using the extended transition period difficult or impossible because of the potential
differences in accounting standards used.
Use of Estimates
The preparation of financial
statements in conformity with U.S. GAAP requires the Company's management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Making estimates requires
management to exercise significant judgment. Such estimates may be subject to change as more current information becomes available and
accordingly the actual results could differ significantly from those estimates. It is at least reasonably possible that the estimate of
the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered
in formulating its estimate, could change in the near term due to one or more future confirming events. Actual results could differ from
those estimates.
Cash and Cash Equivalents
The Company considers all
short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company did not have
any cash equivalents as of December 31, 2023 and 2022.
F-
36
PHOENIX BIOTECH ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2023
Restricted Cash
The Company considers all
cash to be held for a specific purpose restricted cash. As of December 31, 2023 and 2022, the Company had $
0
and $
41,665,974
in restricted
cash, respectively. The restricted cash as of December 31, 2022 was intended to satisfy stockholder redemption payments.
The cash
and restricted cash balances included in the balance sheets as of December 31, 2023 and 2022, are comprised of the following:
December 31,
2023
2022
Cash
$
96,873
$
475,870
Restricted cash
—
41,665,974
Total cash and restricted cash
$
96,873
$
42,141,844
Money Market Funds Held in Trust Account
At December 31, 2023, the
assets held in Trust Account were held in money market funds that invested in U.S. Treasury securities. At December 31, 2022, substantially
all of the assets held in the Trust Account were held as cash. The Company's investments held in the Trust Account are classified
as trading securities. Trading securities are presented on the balance sheets at fair value at the end of each reporting period. Gains
and losses resulting from the change in fair value of investments held in the Trust Account and interest earned on marketable securities
are included in the accompanying statements of operations. The estimated fair values of investments held in the Trust Account are
determined using available market information.
Shareholder Redemption Liability
On December 20, 2022,
in connection with the Company's special meeting held to consider the First Charter Amendment, the Company's stockholders
redeemed
16,211,702
shares of Class A common stock subject to possible redemption at $
10.20
per share redemption value,
plus a pro rata share of interest earned. Of the total amount redeemed, payments for
2,581,004
shares of Class A common
stock totaling $
26,481,101
plus a true-up payment of $
1,361,646
for a total liability of $
27,842,747
were subsequently paid to redeeming
stockholders on January 3, 2023. Therefore, a portion of the total redemption payment has been classified as a stockholder redemption
liability in the accompanying balance sheet as of December 31, 2022.
Offering Costs Associated with the IPO
Offering costs, including
additional underwriting fees associated with the underwriter's partial exercise of the over-allotment option, consist principally
of legal, accounting, underwriting fees and other costs directly related to the IPO. Offering costs, including those attributable to the
underwriter's partial exercise of the over-allotment option, amounted to $
12,729,318
. This amount was charged to stockholders'
deficit upon the completion of the IPO.
Concentration of Credit Risk
Financial instruments that
potentially subject the Company to concentrations of credit risk consist of cash accounts in a financial institution, which, at times,
may exceed the Federal Deposit Insurance Corporation coverage limit of $
250,000
. At December 31, 2023 and 2022, the Company has not experienced
losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
Fair Value of Financial Instruments
The fair value of the Company's
financial assets and liabilities reflects management's estimate of amounts that the Company would have received in connection with
the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants
at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the
use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions
about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities
based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1: Quoted prices
in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for
the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
F-
37
PHOENIX BIOTECH ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2023
Level 2: Observable
inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities
and quoted prices for identical assets or liabilities in markets that are not active.
Level 3: Unobservable
inputs based on the Company's assessment of the assumptions that market participants would use in pricing the asset or liability.
Income Taxes
The Company complies with
the accounting and reporting requirements of ASC 740, "Income Taxes" ("ASC 740"), which requires an asset and
liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for
differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts,
based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation
allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
ASC 740 prescribes a recognition
threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be
taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination
by taxing authorities. There were
no
unrecognized tax benefits as of December 31, 2023 and 2022. The Company recognizes accrued interest
and penalties related to unrecognized tax benefits as income tax expense.
No
amounts were accrued for the payment of interest and penalties
at December 31, 2023 and 2022. The Company is currently not aware of any issues under review that could result in significant payments,
accruals, or material deviation from its position. The Company is subject to income tax examinations by major taxing authorities since
inception.
Deferred tax liabilities
and assets are determined based on the difference between the financial statement and tax basis of assets and liabilities, using enacted
tax rates in effect for the year in which the differences are expected to reverse. Current income taxes are based on the year's
income taxable for federal and state income tax reporting purposes. Total tax provision may differ from the statutory tax rates applied
to income before provision for income taxes due principally to expenses charged which are not tax deductible.
The total provision benefit for income taxes is
comprised of the following:
December 31,
2023
December 31,
2022
Current expense
$
(
94,819
)
$
(
599,159
)
Deferred tax benefit
—
—
Change in valuation allowance
—
—
Total income tax (expense) benefit
$
(
94,819
)
$
(
599,159
)
The net deferred tax assets in the accompanying
balance sheets included the following components:
December 31,
2023
December 31,
2022
Deferred tax assets
$
607,516
$
596,692
Deferred tax liabilities
—
—
Valuation allowance for deferred tax assets
(
607,516
)
(
596,692
)
Net deferred tax assets
$
—
$
—
The deferred tax assets as
of December 31, 2023 and 2022 were comprised of the tax effect of cumulative temporary differences as follows:
December 31,
2023
December 31,
2022
General and administration expenses before business combination
$
607,516
$
596,692
Valuation allowance for deferred tax assets
(
607,516
)
(
596,692
)
Total
$
—
$
—
F-
38
PHOENIX BIOTECH ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2023
In assessing the realization
of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will
not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the
periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled
reversal of deferred tax assets, projected future taxable income and tax planning strategies in making this assessment. For the year ended
December 31, 2023 and 2022, the valuation allowance was $
607,516
and $
596,692
, respectively.
A reconciliation of the statutory
federal income tax provision (benefit) to the Company's effective tax rate is as follows:
December 31,
2023
December 31,
2022
Statutory federal income tax rate
21.0
%
21.0
%
State taxes, net of federal tax benefit
0.0
%
0.0
%
Valuation allowance
(
17.33
)%
852.7
%
Income tax provision (benefit)
3.67
%
873.7
%
Class A Common Stock Subject to Possible
Redemption
The Company accounts for
its Class A common stock subject to possible redemption in accordance with the guidance in ASC 480. Shares of Class A common
stock subject to mandatory redemption (if any) are classified as a liability instrument and are measured at fair value. Conditionally
redeemable Class A common stock (including Class A common stock that features redemption rights that are within the control
of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company's control) is classified
as temporary equity. At all other times, Class A common stock is classified as stockholders' equity. The Company's Class A
common stock features certain redemption rights that are considered to be outside of the Company's control and subject to occurrence
of uncertain future events. Accordingly, at December 31, 2023 and 2022,
764,957
and
1,288,298
shares of Class A common stock subject
to possible redemption are presented as temporary equity, outside of the stockholders' deficit section of the Company's balance
sheets.
The Company recognizes changes
in redemption value immediately as they occur and adjusts the carrying value of redeemable Class A common stock to equal the redemption
value at the end of each reporting period. Increases or decreases in the carrying amount of redeemable common stock are affected by charges
against additional paid in capital and accumulated deficit.
At December 31, 2023 and
2022, the Class A common stock subject to possible redemption reflected in the balance sheets is reconciled in the following table:
Class A common stock subject to possible redemption, December 31, 2021
$
178,500,000
Plus: Accretion of carrying value to redemption value
2,662,553
Less: redemption of shares
(
167,693,708
)
Class A common stock subject to possible redemption, December 31, 2022
$
13,468,845
Less: Redemption
(
5,638,880
)
Plus: Accretion of carrying value to redemption value
606,346
Class A common stock subject to possible redemption, December 31, 2023
$
8,436,311
Net Loss per Common Stock
The Company has two classes
of shares, which are referred to as Class A common stock and Class B common stock (the "Class B common stock" or
the "Founder Shares"). Earnings and losses are shared pro rata between the two classes of shares. Public Warrants (see Note
3) and Private Placement Warrants (see Note 4) to purchase an aggregate of
9,192,500
shares of Class A common stock at $
11.50
per
share were issued on October 29, 2021. At December 31, 2023 and December 31, 2022, no Public Warrants or Private Placement
Warrants have been exercised. The
9,192,500
shares of Class A common stock underlying outstanding Public Warrants and Private
Placement Warrants were excluded from diluted net income per share for the year ended December 31, 2023 and 2022 because they
are contingently exercisable, and the contingencies have not yet been met. As a result, diluted net income per common stock is the same
as basic net income per common stock for the period.
The tables below present a reconciliation of the numerator and denominator used to
compute basic and diluted net income per share for each class of stock.
For the Year Ended December 31,
2023
2022
Class A
common stock
Class B
Common stock
Class A
common stock
Class B
Common stock
Basic and diluted net income per share:
Numerator:
Allocation of net income
$
(
1,641,020
)
$
(
895,213
)
$
(
531,288
)
$
(
136,448
)
Denominator:
Weighted average shares outstanding
4,224,247
2,304,421
17,896,428
4,596,250
Basic and diluted net income per share
$
(
0.39
)
$
(
0.39
)
$
(
0.03
)
$
(
0.03
)
F-
39
PHOENIX BIOTECH ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2023
Accounting for Warrants
The Company accounts for
warrants as either equity-classified or liability-classified instruments based on an assessment of the instruments' specific terms
and applicable authoritative guidance in ASC 480 and ASC 815,
Derivatives and Hedging
. The assessment considers whether the instruments
are free standing financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the instruments
meet all of the requirements for equity classification under ASC 815, including whether the instruments are indexed to the Company's
own common stock and whether the instrument holders could potentially require "net cash settlement" in a circumstance outside
of the Company's control, among other conditions for equity classification. This assessment, which requires the use of professional
judgment, was conducted at the time of warrant issuance and as of each subsequent period end date while the instruments are outstanding.
Management has concluded that the Public Warrants and Private Placement Warrants issued pursuant to the warrant agreement qualify for
equity accounting treatment.
Recent Accounting Pronouncements
In December 2023, the FASB
issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which requires disclosure of incremental
income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements.
ASU 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company's management
does not believe the adoption of ASU 2023-09 will have a material impact on its consolidated financial statements and disclosures.
Management does not believe
that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying
unaudited condensed financial statements.
Note 3 — Initial Public Offering and
Over-Allotment
Pursuant to the IPO, the
Company sold
17,500,000
units (including
2,000,000
units as part of the underwriter's partial exercise of the over-allotment option)
at a price of $
10.00
per Unit. Each Unit consists of
one
Public Share, and a Public Warrant. Each Public Warrant entitles the holder to
purchase
one
share of Class A common stock at a price of $
11.50
per share, subject to adjustment (see Note 7).
Note 4 — Private Placement Warrants
On October 8, 2021,
simultaneously with the consummation of the IPO, the Company consummated the issuance and sale ("Private Placement") of the
Private Placement Units in a private placement transaction at a price of $
10.00
per Private Placement Unit, generating gross proceeds
of $
8,850,000
. The Private Placement Units were purchased by Cantor (
155,000
Units), CCM (
30,004
Units) and the Sponsor (
699,996
Units). Each whole Private Placement Unit consists of one Private Placement Share and one-half of a redeemable warrant ("Private
Placement Warrant"). Each whole Private Placement Warrant will be exercisable to purchase one share of Class A common
stock at a price of $
11.50
per share, subject to adjustment. A portion of the proceeds from the Private Placement Units was added to the
proceeds from the IPO to be held in the Trust Account. If the Company does not complete a business combination within the Combination
Period, the proceeds from the sale of the Private Placement Units will be used to fund the redemption of the Public Shares (subject to
the requirements of applicable law), and the Private Placement Units and all underlying securities will be worthless.
F-
40
PHOENIX BIOTECH ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2023
Note 5 — Related Party Transactions
Founder Shares
On September 18, 2021,
the Sponsor provided funds to pay for certain costs totaling $
25,000
on behalf of the Company as consideration for
4,598,750
Founder Shares.
Later in September 2021, the Company effected a
0.017
for
1
stock dividend for each Founder Share outstanding, and, as a result,
the Sponsor held
4,679,125
Founder Shares following the stock dividend. As a result, the Company's shares have been retroactively
adjusted for this stock dividend; however, due to the shares being closely held the corresponding earnings have not been capitalized from
retained earnings. The Sponsor agreed to forfeit up to
592,875
Founder Shares to the extent that the 45-day over-allotment option was
not exercised in full by the underwriter. Since the underwriter exercised the over-allotment option only in part, the Sponsor forfeited
82,875
Founder Shares.
The Sponsor has agreed, subject
to limited exceptions, not to transfer, assign or sell any of the Founder Shares until the earliest of: (a) one year after the completion
of a business combination and (b) subsequent to a business combination, (x) if the closing price of the shares of Class A
common stock equals or exceeds $
12.00
per share (as adjusted) for any
20
trading days within any
30
-trading day period commencing
at least
150
days after a business combination, or (y) the date on which the Company completes a liquidation, merger, share
exchange or other similar transaction that results in all of the Public Stockholders having the right to exchange their shares of Class A
common stock for cash, securities or other property.
On July 3, 2023, the Sponsor
delivered a notice of conversion of an aggregate of
4,596,250
Founder Shares into an equal number of shares of Class A common stock. Such
Founder Shares were subsequently converted into Class B common stock.
Related Party Loans
On June 18, 2021, the
Sponsor agreed to loan the Company an aggregate of up to $
300,000
to cover expenses related to the IPO pursuant to a promissory note which
was amended on September 10, 2021 (as amended, the "Note"). This loan is non-interest-bearing. There was no balance on
the Note as of December 31, 2023 and 2022.
In addition, in order to
finance transaction costs in connection with a business combination, the Sponsor or an affiliate of the Sponsor, or certain of the Company's
officers and directors may, but are not obligated to, loan the Company funds as may be required ("Working Capital Loans").
If the Company completes a business combination, the Company would repay the Working Capital Loans out of the proceeds of the Trust Account
released to the Company. Otherwise, the Working Capital Loans would be repaid only out of funds held outside the Trust Account. In the
event that a business combination does not close, the Company may use a portion of proceeds held outside the Trust Account to repay the
Working Capital Loans but no proceeds held in the Trust Account would be used to repay the Working Capital Loans. The Working Capital
Loans will either be repaid upon consummation of a business combination, without interest, or, at the lender's discretion, up to
$
1.5
million of such Working Capital Loans may be convertible into units of the post business combination entity at a price of $
10.00
per unit. The units would be identical to the Private Placement Units. On December 13, 2022, the Company entered into a promissory
note with the Sponsor. In order to fund ongoing operations, the Sponsor will loan up to $
1,500,000
to the Company. The Promissory
Note does not bear interest and matures upon the earlier of (a) the closing of an initial business combination and (b) the Company's
liquidation. In the event that the Company does not consummate an initial business combination, the Promissory Note will be repaid only
from amounts remaining outside of the Trust Account, if any. On December 8, 2023, the Company and the Lender amended the Promissory Note
to increase the aggregate principal amount of the Promissory Note from $
1,500,000
to $
1,600,000
. All other material terms of the Promissory
Note remain in full force and effect. On May 8, 2023, June 9, 2023, September 12, 2023 and December 18, 2023, the sponsor loaned
the company $
250,000
, $
275,000
, $
220,000
and $
160,000
under the Promissory Note in connection with extensions of the Company's liquidation
date, respectively. As of December 31, 2023 and 2022, there was $
1,555,000
and $
650,000
in borrowings under the Working Capital Loans,
respectively.
Consulting Services
The Company entered into
an agreement, commencing on the date of its listing on Nasdaq, to pay the spouse of the Company's Chief Executive Officer a monthly
consulting fee of $
15,000
for assisting the Company in identifying and evaluating potential acquisition targets. Upon completion of the
Company's initial business combination or the Company's liquidation, the Company's will cease paying these monthly fees.
The payments ended on December 31, 2022 in connection with the approval of the Charter Amendment. For the year ended December 31, 2023,
$
0
has been incurred under this agreement. For the year ended December 31, 2022, $
180,000
has been incurred under this agreement, respectively.
Advisory Services
The Company engaged CCM,
an affiliate of the Company, the Sponsor and/or certain of its directors and officers, to provide consulting and advisory services in
connection with the IPO, for which it was entitled to a fee in an amount equal to $
465,000
, which was paid to CCM upon the closing of
the IPO, and $
1,162,500
, which will be paid to CCM upon the closing of the Company's initial business combination. Affiliates of
CCM have and manage investment vehicles with a passive investment in the Sponsor.
F-
41
PHOENIX BIOTECH ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2023
Support Services
The Company entered into
an agreement, commencing on the date of its listing on Nasdaq through the earlier of the consummation of a business combination and the
Company's liquidation, to pay an affiliate of the Sponsor a monthly fee of $
20,000
for office space, secretarial and administrative
services. Payments under the agreement were suspended on December 31, 2022 and reinstated on March 31, 2023. For the year ended December
31, 2023, $
200,000
has been incurred under this agreement. For the year ended December 31, 2022, $
240,000
has been incurred under this
agreement, respectively. As of December 31, 2023, there was a $
75,000
outstanding balance owed to the Sponsor.
Note 6 — Commitments and Contingencies
Registration Rights
Pursuant to a registration
rights agreement entered into on October 5, 2021, the holders of the Founder Shares, Private Placement Warrants and warrants that
may be issued upon conversion of Working Capital Loans (and any Class A common stock issuable upon the exercise of the Private Placement
Warrants and warrants that may be issued upon conversion of Working Capital Loans and upon conversion of the Founder Shares) are entitled
to registration rights, requiring the Company to register such securities and any other securities of the Company acquired by them prior
to the consummation of a business combination for resale. The holders of these securities are entitled to make up to three demands, excluding
short form demands, that the Company register such securities. In addition, the holders have certain "piggy-back" registration
rights with respect to registration statements filed subsequent to the completion of a business combination. The registration rights agreement
does not contain liquidated damages or other cash settlement provisions resulting from delays in registering the securities. The Company
will bear the expenses incurred in connection with the filing of any such registration statements.
Underwriting Agreement
The Company granted the underwriter
a 45-day option from the date of the final prospectus relating to the IPO to purchase up to
2,325,000
additional Units to cover
over-allotments, if any, at the IPO price less the underwriting discounts and commissions. On October 8, 2021, the underwriter partially
exercised its over-allotment option and purchased
2,000,000
units at $
10.00
per unit.
The underwriter was paid
a cash underwriting discount of $
0.20
per unit, or $
3,100,000
in the aggregate at the closing of the IPO, of which $
465,000
was reimbursed
to the Company to pay for additional advisors. The underwriter agreed to defer any additional fees related to the exercise of the over-allotment
option until the Company completes a business combination. As such, $
400,000
of additional underwriting fees related to the over-allotment
have been deferred. In addition, the underwriter is entitled to deferred underwriting commissions of $
0.50
per unit, or $
8,750,000
($
9,150,000
in the aggregate when including the $
400,000
noted above) from the closing of the IPO. The deferred fee will become payable
to the underwriter from the amounts held in the Trust Account solely in the event that the Company completes a business combination, subject
to the terms of the underwriting agreement.
Business Combination Agreement
On June 4, 2023, the
Company entered into the Business Combination Agreement.
At the Effective Time, (i) each
outstanding share of CERo common stock will be cancelled and converted into (a) the right to receive a number of shares of Class A
common stock, equal to $
50,000,000
,
minus
the Aggregate Liquidation Preference,
divided
by the Fully
Diluted Company Capitalization,
divided
by the Exchange Ratio and (b) the right to receive Earnout Shares; (ii) each
outstanding CERo option will be converted into an option to purchase a number of shares of Class A common stock, equal to (A) the
number of shares of CERo common stock subject to such option immediately prior to the Effective Time,
multiplied
by (B) the
Exchange Ratio, at an exercise price per share equal to the current exercise price per share for such option divided by the Exchange Ratio;
in each case, rounded down to the nearest whole share, and rounded up to the nearest whole cent in the case of the exercise price of the
CERo options; (iii) each outstanding share of CERo preferred stock, will be converted into a number of shares of Class A common
stock, equal to the number of shares of Class A common stock obtained by
dividing
the liquidation preference thereof
by $
10.00
and the contingent right to receive such holder's Earn-Out Pro Rata Portion, and (iv) each CERo warrant
outstanding as of immediately prior to the Effective Time will be converted into a warrant to acquire a number of shares of Class A
common stock equal to the number of shares of CERo preferred stock subject to the corresponding warrant immediately prior to the Effective
Time,
multiplied
by the Aggregate Liquidation Preference of such underlying shares of CERo preferred stock, and
divided
by
$
10.00
, with the exercise price per share for such warrant equal to (A) the current aggregate exercise price of such warrant (the
current exercise price per share of CERo preferred stock applicable to the corresponding warrant immediately prior to the Effective Time,
multiplied
by
the number of shares of CERo preferred stock issuable upon exercise thereof),
divided
by (B) the number of shares
of Class A common stock issuable upon exercise thereof. Subject to certain exceptions, such terms and conditions applicable to a
New CERo warrant will be the same terms and conditions as were applicable to a CERo warrant immediately prior to the Effective Time. The
Company will issue an aggregate of approximately
5.0
million shares of Class A common stock to the holders of CERo common stock
and CERo preferred stock as consideration in the Business Combination.
F-
42
PHOENIX BIOTECH ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2023
Sponsor Support Agreement
In connection with the execution
of the Business Combination Agreement, the Sponsor, as the sole holder of the Class B common stock, and each of the Company's
officers and directors entered into a support agreement with the Company and CERo (the "Sponsor Support Agreement"). Under
the Sponsor Support Agreement, the Sponsor agreed to vote, at any meeting of the stockholders of the Company and in any action by written
consent of the stockholders of the Company, all of its shares of Class B common stock (together with any other equity securities
of the Company that it holds of record or beneficially, as of the date of the Sponsor Support Agreement, or of which it acquires record
or beneficial ownership after the date thereof, the "Subject Company Shares") (i) in favor of (a) the Business Combination
Agreement and the transactions contemplated thereby and (b) the other proposals that the Company and CERo agreed in the Business
Combination Agreement shall be submitted at such meeting for approval by the Company's stockholders (together with the proposal
to obtain the Company Stockholder Approval, the "Required Transaction Proposals") and (ii) against any proposal that
conflicts or materially impedes or interferes with any Required Transaction Proposals or that would adversely affect or delay the Business
Combination. The Sponsor Support Agreement also prohibits the Sponsor from, among other things and subject to certain exceptions, transferring
any Subject Company Shares held by the Sponsor or taking any action that would have the effect of preventing or materially delaying the
Sponsor from performing its obligations under the Sponsor Support Agreement, until the earlier of the Closing or the termination of the
Sponsor Support Agreement according to its terms. On July 3, 2023, the Sponsor delivered notice of conversion of an aggregate of
4,596,250
shares of Class B common stock into an equal number of shares of Class A common stock. Following the Conversion, the Sponsor held an aggregate
of
5,296,246
shares of Class A common stock, all of which are subject to the Sponsor Support Agreement.
CERo Support Agreements
In connection with the execution
of the Business Combination Agreement, certain CERo stockholders (the "CERo Supporting Stockholders") entered into support
agreements with CERo (the "CERo Support Agreements"). Under the CERo Support Agreements, each CERo Supporting Stockholder
agreed as promptly as practicable following the time at which the Registration Statement/Proxy Statement shall have been declared effective
and made available to such CERo Supporting Stockholders, to execute and deliver a written consent with respect to all outstanding shares
of CERo common stock and CERo preferred stock held by such CERo Supporting Stockholder (the "Subject CERo Shares") approving
the Business Combination Agreement and the transactions contemplated thereby (including the Business Combination). In addition to the
foregoing, each CERo Supporting Stockholder agreed that, at any meeting of the holders of CERo capital stock, each such CERo Supporting
Stockholder will appear at the meeting, in person or by proxy, and cause its Subject CERo Shares to be counted as present thereat for
purposes of calculating a quorum and voted (i) to approve and adopt the Business Combination Agreement, the transactions contemplated
thereby (including the Business Combination), and any other matters necessary or reasonably requested by CERo for consummation of the
Business Combination, and (ii) against any proposal that conflicts or materially impedes or interferes with, or would adversely affect
or delay, the consummation of the transactions contemplated by the Business Combination Agreement (including the Business Combination).
Note 7 — Stockholders' Deficit
Common Stock
Class A common
stock
— The Company is authorized to issue
60,000,000
shares of Class A common stock with a par value of $
0.0001
per
share. As of December 31, 2023 and 2022, there were
5,481,250
and
885,000
shares of Class A common stock issued and outstanding (excluding
764,957
and
1,288,298
shares subject to possible redemption), respectively.
Class B common
stock
— The Company is authorized to issue
10,000,000
shares of Class B common stock with a par value of $
0.0001
per
share. Holders of Class B common stock are entitled to
one
vote for each share. On July 3, 2023, the Sponsor delivered notice of
conversion of an aggregate of
4,596,250
shares of Class B common stock into an equal number of shares of Class A common stock. As of December
31, 2023 and 2022, there were
0
and
4,596,250
shares of Class B common stock issued and outstanding.
Prior to the consummation
of an initial business combination, only holders of shares of Class B common stock will have the right to vote on the election of
directors. Holders of shares of Class A common stock and shares of Class B common stock will vote together as a single class
on all other matters submitted to a vote of stockholders.
F-
43
PHOENIX BIOTECH ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2023
Preferred stock
— The Company is authorized to issue
1,000,000
shares of preferred stock with such designations, voting and other
rights and preferences as may be determined from time to time by the Company's board of directors. As of December 31, 2023 and 2022,
there were no shares of preferred stock issued or outstanding.
Warrants —
At December 31, 2023 and 2022, there were
8,750,000
Public Warrants and
442,500
Private Placement Warrants outstanding. The Public Warrants
will become exercisable 30 days after the completion of a business combination. No warrants will be exercisable for cash unless the
Company has an effective and current registration statement covering the common stock issuable upon exercise of the warrants and a current
prospectus relating to such common stock.
Notwithstanding the foregoing,
if a registration statement covering the common stock issuable upon exercise of the Public Warrants is not effective within a specified
period following the consummation of a business combination, warrant holders may, until such time as there is an effective registration
statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise warrants
on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act, provided that such exemption is
available. If that exemption, or another exemption, is not available, holders will not be able to exercise their warrants on a cashless
basis. The Public Warrants will expire
five years
after the completion of a business combination or earlier upon redemption or liquidation.
Once the warrants become
exercisable, the Company may redeem the Public Warrants:
●
in
whole and not in part;
●
at a price of $
0.01
per warrant;
●
upon not less than
30
days' prior written notice of redemption;
●
if, and only if, the reported last sale price of Class A common stock equals or exceeds $
18.00
per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations), for any
20
trading days within a
30
-trading-day period commencing at any time after the warrants become exercisable and ending on the third business day prior to the notice of redemption to warrant holders; and
●
if, and only if, there is a current registration statement in effect with respect to the shares of Class A common stock underlying the warrants.
If the Company calls the
Public Warrants for redemption, management will have the option to require all holders that wish to exercise the Public Warrants to do
so on a "cashless basis," as described in the warrant agreement.
The Private Placement Warrants
are identical to the Public Warrants underlying the Units sold in the IPO, except that the Private Placement Warrants and the common stock
issuable upon the exercise of the Private Placement Warrants will not be transferable, assignable, or salable until after the completion
of a business combination, subject to certain limited exceptions. The Private Placement Warrants will be redeemable by the Company and
exercisable by such holders on the same basis as the Public Warrants.
The exercise price and number
of shares of common stock issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a
stock dividend, extraordinary dividend or recapitalization, reorganization, merger, or consolidation. However, the warrants will not be
adjusted for issuances of common stock at a price below their respective exercise prices, other than as set forth below. Additionally,
in no event will the Company be required to net cash settle the warrants. If the Company is unable to complete a business combination
within the Combination Period and the Company liquidates the funds held in the Trust Account, holders of warrants will not receive any
of such funds with respect to their warrants, nor will they receive any distribution from the Company's assets held outside of the
Trust Account with respect to such warrants. Accordingly, the warrants may expire worthless.
In addition, if the Company
issues additional common stock or equity-linked securities for capital raising purposes in connection with the closing of a business combination
at an issue price or effective issue price of less than $
9.20
per share of common stock (with such issue price or effective issue price
to be determined in good faith by the Company's board of directors, and in the case of any such issuance to the Initial Stockholders
or their affiliates, without taking into account any Founder Shares held by them prior to such issuance) (the "Newly Issued Price"),
and (y) the aggregate gross proceeds from such issuances represent more than
60
% of the total equity proceeds, and interest thereon,
available for the funding of a business combination on the date of the consummation of a business combination (net of redemptions), and
(z) the volume weighted-average trading price of the Company's common stock during the 20-trading-day period starting
on the trading day prior to the day on which the Company consummates a business combination (such price, the "Market Value")
is below $
9.20
per share, the exercise price of the warrants will be adjusted (to the nearest cent) to be equal to
115
% of the greater
of (i) the Market Value or (ii) the Newly Issued Price, and the $
18.00
F-
44
PHOENIX BIOTECH ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2023
Note 8 — Fair Value Measurements
The fair value of the Company's
financial assets and liabilities reflects management's estimate of amounts that the Company would have received in connection with
the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants
at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the
use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions
about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities
based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1: Quoted prices
in active markets for identical assets or liabilities. An active market for an asset or liability is a market in which transactions for
the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2: Observable
inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities
and quoted prices for identical assets or liabilities in markets that are not active.
Level 3: Unobservable
inputs based on the Company's assessment of the assumptions that market participants would use in pricing the asset or liability.
At December 31, 2023, the
assets held in the Trust Account were held in money market funds. All of the Company's investments held in the Trust Account are
classified as trading securities.
The following table presents
information about the Company's assets and liabilities that are measured at fair value on a recurring basis at December 31, 2023,
and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value.
At December 31, 2022
there were no assets or liabilities measured at fair value.
December 31, 2023
Level
Quoted
Prices in
Active
Markets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Other
Unobservable
Inputs
(Level 3)
Assets:
Money Market Funds
1
$
8,436,311
—
—
Note 9 — Subsequent Events
The Company evaluated subsequent
events and transactions that occurred up to the date the financial statements were issued. Based upon this review, other than described
below, the Company did not identify any other subsequent events that would have required adjustment or disclosure in the financial statements.
On January 3, 2024, the Company
held a special meeting of stockholders (the "Third Special Meeting"). At the Third Special Meeting, the Company's stockholders
approved an amendment (the "Third IMTA Amendment") to the IMTA, as amended by the First IMTA Amendment and the Second IMTA
Amendment, and an amendment (the "Third Charter Amendment") to the Charter, as amended by the First Charter Amendment and
the Second Charter Amendment, to extend the business combination period up to three times for one month each time (the "Third Extension").
In connection with the approval
of the Third Extension, the Sponsor deposited $
22,600
in the Trust Account, and holders of
11,625
Public Shares exercised redemption rights
requiring the Company to make a series of payments of an aggregate of $
128,133
for an aggregate $
11.02
per redeemed share. As a result,
following satisfaction of such redemptions, the Company had
6,234,582
shares of Class A common stock outstanding, of which (i)
753,332
were Public Shares, which were entitled to receive a pro rata portion of the remaining funds in the Company's Trust Account in connection
with its initial Business Combination, a liquidation or certain other events, (ii)
4,596,250
were Class A common stock issued upon the
conversion of an equal number of shares of the Class B common stock, which did not have redemption rights, and (iii)
885,000
were Private
Placement Shares, which did not have redemption rights. As a result of the deposit described above, such payments and accrual of interest,
the balance in the trust account as of the last extension payment was approximately $
8.4
million.
F-
45
PHOENIX BIOTECH ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2023
Business Combination
On February 5, 2024, the
parties entered into Amendment No. 1 to the Business Combination Agreement to, among other things, (i) remove the minimum cash condition,
(ii) modify the stock-price based milestones such that (a) the trading price condition for the First Level Earnout Target shall be reset
from $
12.50
to
125
% of the reset Conversion Price of the Series A Preferred Stock and (b) the trading price condition for the Second Level
Earnout Target shall be reset from $
15.00
to
150
% of the reset Conversion Price of the Series A Preferred Stock, and (iii) increase the
aggregate number of shares of Class A common stock issuable to the stockholders of CERo in connection with the Business Combination from
4,651,704
shares to
5,000,000
shares. Such number of shares is in addition to up to
1,200,000
shares issuable upon satisfaction of certain
earn-out conditions and
382,651
shares issuable upon exercise of rollover options or warrants.
On February 8, 2024, the
Company held a special meeting of stockholders (the "Fourth Special Meeting"). At the Fourth Special Meeting, the Company's
stockholders adopted and approved (i) the Business Combination Agreement, pursuant to which Merger Sub merged with and into CERo, with
CERo surviving as a wholly-owned subsidiary of the Company and approved the Business Combination and the other transactions and ancillary
documents contemplated by and required for the Business Combination; (ii) on a non-binding advisory basis, certain changes to the Charter,
including the name change to CERo Therapeutics Holdings, Inc., share authorizations, and others; (iii) the issuance of Class A common
stock to CERo stockholders pursuant to the Business Combination Agreement; (iv) the election of five directors; and (v) the 2024 Equity
Incentive Plan and the 2024 Employee Stock Purchase Plan, contingent of the consummation of the Business Combination.
In connection with the approval
of the Business Combination, holders of
671,285
shares of Class A common stock, exercised redemption rights. As a result, following satisfaction
of such redemptions, we had
5,563,297
shares of Class A common stock outstanding, of which (i)
82,047
were shares of Class A common stock
issued to the public in our IPO, which shares of Class A common stock were entitled to receive a pro rata portion of the remaining funds
in our Trust Account in connection with its initial business combination, a liquidation or certain other events, (ii)
4,596,250
were shares
of Class A common stock issued upon the conversion of an equal number of shares of our Class B common stock acquired by Sponsor prior
to our IPO, which shares of Class A common stock did not have redemption rights, and (iii)
885,000
were shares of Class A common stock
included in the private placement units acquired in the private placement by the Sponsor and other investors concurrent with our IPO,
which shares of Class A common stock did not have redemption rights. On February 14, 2024, we made a series of payments of an aggregate
of $
7,456,463.30
to holders of redeemed Class A common stock (an aggregate of $
11.11
per redeemed share).
On February 13, 2024, the
parties entered into Amendment No. 2 to the Business Combination Agreement to create two additional pools of earnout shares of Class A
common stock, one pool of which contained
875,000
shares, which were fully vested at closing of the Business Combination and which were
issued as an offset to the agreement by Sponsor to forfeit an offsetting number of shares, and one pool of which will contain
1,000,000
shares, which will be fully vested upon the achievement of certain regulatory milestone-based earnout targets and make certain other technical
changes to the timing and process for issuance of the
1,200,000
shares of Class A common stock subject to the other earn-out conditions
set forth in the Business Combination Agreement.
The Business Combination
closed on February 14, 2024, at which time the following occurred:
1.
Each
outstanding share of the Company's preferred stock was converted into the number of shares of Class A common stock calculated by
dividing the liquidation preference by $
10.00
.
2.
Each outstanding share of the Company's common stock was converted into the number of shares of Class A common stock calculated by multiplying each share by the Exchange Ratio. The Exchange Ratio of
0.064452
was calculated by first subtracting the aggregate liquidation preference of outstanding preferred shares from $
50
million, then dividing the result by the number of shares of the Company's common stock outstanding and dividing by $
10.00
per share.
3.
Each holder of the Company's common stock received a pro rata portion of up to
1.2
million Earnout Shares,
1,000,000
of which are subject to vesting upon the achievement of certain stock price-based earnout targets and
200,000
of which are subject to vesting upon a change of control, respectively.
4.
Certain holders of the Company's common stock received a pro rata portion of
875,000
Earnout Shares, which became fully vested upon the closing of the Business Combination.
5.
Certain holders of the Company's common stock received a pro rata portion of up to
1.0
million Earnout Shares, which are subject to vesting upon the Company's filing an investigational new drug application ("IND") with the FDA.
6.
Each outstanding Company option was converted into an option to purchase a number of shares of Class A common stock, equal to the Company's common shares underlying the option multiplied by the Exchange Ratio, at an exercise price per share equal to the Company option exercise price divided by the Exchange Ratio.
7.
Each warrant to purchase CERo preferred stock was converted into a warrant to acquire a number of shares of Class A common stock obtained by dividing the warrant as-if-exercised liquidation preference by $
10.00
, with the exercise price equal to the total CERo warrant exercise amount divided by the number of shares of Class A common stock issuable upon exercise.
8.
The CERo Notes automatically converted into shares of Series A Preferred Stock.
F-
46
PHOENIX BIOTECH ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2023
PIPE Financing
In February 2024, New CERo
consummated a private placement of
10,080
shares of New CERo Series A Preferred Stock, par value $
0.0001
per share (the "Series
A Preferred Stock"), warrants to purchase
612,746
shares of Common Stock (the "Common Warrants") and warrants to purchase
2,500
shares of Series A Preferred Stock (the "Preferred Warrants" and, together with the Common Warrants, the "PIPE
Warrants"), pursuant to the Amended and Restated Securities Purchase Agreement, dated February 14, 2024, by and among the Company,
CERo and certain accredited investors (the "Initial Investors") for aggregate cash proceeds to New CERo of approximately $
9.98
million. In April 2024, New CERo consummated a private placement of
626
shares of Series B convertible preferred stock, par value $
0.0001
per share ("Series B Preferred Stock"), pursuant to the Securities Purchase Agreement, dated March 28, 2024, by and among
New CERo and certain accredited investors (the "Additional Investors" and, together with the Initial Investors, the "PIPE
Investors"), for aggregate cash proceeds to New CERo of approximately $
0.5
million. A portion of such Series A Preferred Stock was
issued as consideration for the cancellation of outstanding indebtedness or securities of the Company or CERo, including a promissory
note of the Company and certain convertible bridge notes of CERo. Such transactions collectively are referred to as the "PIPE Financing."
In connection with the PIPE
Financing, New CERo entered into the PIPE Registration Rights Agreements with the PIPE Investors. The terms of the PIPE Registration Rights
Agreements require New CERo to register the number of shares of common stock, par value $
0.0001
per share ("Common Stock")
equal to the sum of (i)
200
% of the maximum number of Common Stock issuable upon conversion of the Series A Preferred Stock and Series
B Preferred Stock (assuming for purposes hereof that (w) all the Preferred Warrants have been exercised in full, (x) the Series A Preferred
Stock and Series B Preferred Stock is convertible at the Alternate Conversion Price (as defined in the Series A Certificate of Designations
and Series B Certificate of Designations) assuming an Alternate Conversion Date (as defined in the Series A Certificate of Designations
and Series B Certificate of Designations) of such date of determination, and (y) any such conversion shall not take into account any limitations
on the conversion of the Series A Preferred Stock and Series B Preferred Stock set forth in the Series A Certificate of Designations and
the Series B Certificate of Conversions, respectively) and (ii) the maximum number of Warrant Common Shares issuable upon exercise of
the Common Warrants (without taking into account any limitations on the exercise of the Common Warrants set forth therein). In addition,
New CERo entered into a side letter with Keystone, pursuant to which New CERo agreed to make a payment of $
1.0
million to Keystone, which
amount reflects an original issue discount to Keystone, and to reimburse $
150,000
of legal expenses incurred thereby. Additionally, the
Company entered into a share reallocation agreement (the "Share Reallocation Agreement") with the Sponsor and an institutional
investor party thereto (a "Share Reallocation Investor"). Under the Share Reallocation Agreement, (i) the Share Reallocation
Investor agreed to purchase an aggregate of
1,500
shares of Series A Preferred Stock for an aggregate purchase price of $
1.5
million in
accordance with the Securities Purchase Agreement, and (ii) the Sponsor agreed to forfeit an aggregate of
250,000
shares of Class A Common
Stock held by the Sponsor for no additional consideration other than the commitments and undertakings of the Share Reallocation Investor
made to the Company, in each case, on or promptly following the consummation of the Business Combination at the Closing.
Fee Modification
Prior to the close of the
Business Combination, the Company entered into fee modification agreements with certain third-party vendors and service providers, pursuant
to which such vendors received an aggregate of
1,629,500
shares of Common Stock in lieu of certain payments due to such vendors. As a
result, the cash expenses payable at Closing were reduced by approximately $
8.54
million.
In particular, the Company
entered into a fee modification agreement with CCM, pursuant to which CCM forfeited such fees and the Company issued an aggregate of
1,200,000
shares of Common Stock, with
1,000,000
of such shares being subject to forfeiture unless New CERo conducts a capital-raising transaction
within nine months of the Closing, pursuant to which New CERo shall issue and sell securities in an aggregate amount of at least $
25.0
million, Affiliates of CCM have and manage investment vehicles with a passive investment in the Sponsor.
Equity Line of Credit – Keystone Capital
Partners, LLC ("Keystone")
On February 14, 2024, as
a condition to the closing of the PIPE Financing, New CERo entered into a common stock purchase agreement (the "Common Stock Purchase
Agreement") with Keystone, pursuant to which New CERo may sell and issue, and Keystone is obligated to purchase, up to the lesser
of (i) an aggregate of up to
2,977,070
shares of newly issued shares of Common Stock and (ii) the Exchange Cap (as defined below).
F-
47
PHOENIX BIOTECH ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2023
As consideration for Keystone's
commitment to purchase shares of Common Stock pursuant to the Common Stock Purchase Agreement, at Closing, New CERo issued
119,050
shares
of Common Stock to Keystone. In addition, New CERo has agreed to issue an additional $
250,000
of shares of Common Stock to Keystone at
each of the 90- and 180-day anniversaries of the effectiveness of the registration statement on Form S-1 with respect to the resale of
the shares issuable pursuant to the Common Stock Purchase Agreement, with the number of such shares determined based upon the average
of the daily VWAP (as defined below) for each of the five trading days immediately prior to such 90- or 180-day anniversary.
New CERo does not have a
right to commence any sales of Common Stock to the Investor under the Common Stock Purchase Agreement until the time when all of the conditions
to the New CERo's right to commence sales of Common Stock to the Investor set forth in the Common Stock Purchase Agreement have
been satisfied, including that a registration statement covering the resale of such shares is declared effective by the SEC and the final
form of prospectus contained therein is filed with the SEC (the "Commencement Date"). Over the 36-month period from and after
the Commencement Date, New CERo will control the timing and amount of any sales of Common Stock to Keystone. Actual sales of shares of
Common Stock to Keystone under the Common Stock Purchase Agreement will depend on a variety of factors to be determined by New CERo from
time to time, including, among others, market conditions, the trading price of the Common Stock and determinations by the Company as to
the appropriate sources of funding and New CERo's operations.
At any time from and after
the Commencement Date, on any business day on which the closing sale price of the Common Stock is equal to or greater than $
1.00
(the
"Purchase Date"), New CERo may direct Keystone to purchase a specified number of shares of Common Stock (a "Fixed Purchase")
not to exceed
10,000
shares at a purchase price equal to the lesser of
90
% of (i) the daily volume weighted average price (the "VWAP")
of the Common Stock for the five trading days immediately preceding the applicable Purchase Date for such Fixed Purchase and (ii) the
closing price of a share of Common Stock on the applicable Purchase Date for such Fixed Purchase during the full trading day on such applicable
Purchase Date.
In addition, at any time
from and after the Commencement Date, on any business day on which the closing sale price of the Common Stock is equal to or greater than
$
1.00
and such business day is also the Purchase Date for a Fixed Purchase of the maximum allowable amount of shares of Common Stock (the
"VWAP Purchase Date"), New CERo may also direct Keystone to purchase, on the immediately following business day, an additional
number of shares of Common Stock in an amount up to a defined limit at a purchase price equal to the lesser of
90
% of (i) the closing
sale price of the Common Stock on the applicable VWAP Purchase Date and (ii) the VWAP during the VWAP Purchase Date between the opening
of trading and the purchase termination time. At any time from and after the Commencement Date, on any business day that is also the VWAP
Purchase Date for a VWAP Purchase, New CERo may also direct Keystone to purchase, on such same business day, an additional number of shares
of Common Stock in an amount up to a defined limit (an "Additional VWAP Purchase") at a purchase price equal to the lesser
of
90
% of (i) the closing sale price of the Common Stock on the applicable Additional VWAP Purchase Date and (ii) the VWAP during the
measurement time on the Additional VWAP Purchase Date.
In no event shall New CERo
issue to Keystone under the Common Stock Purchase Agreement more than
19.99
% of the total number of shares of Common Stock outstanding
immediately prior to the execution of the Common Stock Purchase Agreement (the "Exchange Cap"), unless (i) the Company obtains
the approval of the issuance of such shares by its stockholders in accordance with the applicable stock exchange rules or (ii) sales of
Common Stock are made at a price equal to or in excess of the lower of (A) the closing price immediately preceding the delivery of the
applicable notice to the Investor and (B) the average of the closing prices of the Common Stock for the five business days immediately
preceding the delivery of such notice (in each case plus an incremental amount to take into account the Commitment Shares, such that the
sales of such Common Stock to Keystone would not count toward the Exchange Cap because they are "at market" under applicable
stock exchange rules.
Concurrent with the execution
of the Common Stock Purchase Agreement, the Company entered into a registration rights agreement with Keystone (the "ELOC Registration
Rights Agreement"), pursuant to which New CERo agreed to provide Keystone with customary registration rights related to the shares
issued under the ELOC Registration Rights Agreement.
Equity Line of Credit – Arena Business
Solutions Global SPC II, Ltd ("Arena")
On February 23, 2024, New
CERo entered into a purchase agreement (the "Purchase Agreement") with Arena, under which Arena has committed to purchase
up to $
25
million (the "Commitment Amount") of New CERo's shares of Common Stock, subject to the satisfaction of the
conditions in the Purchase Agreement.
F-
48
PHOENIX BIOTECH ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2023
Such sales of Common Stock,
if any, will be subject to certain limitations, and may occur from time to time at New CERo's sole discretion over the period commencing
on the termination of the Common Stock Purchase Agreement and expiring approximately 36 months following such termination, provided that
a Registration Statement (as defined below) is and remains effective, and the other conditions set forth in the Purchase Agreement are
satisfied. New CERo will control the timing and amount of any sales of Common Stock to Arena. Actual sales of shares of Common Stock to
Arena under the Purchase Agreement will depend on a variety of factors to be determined by New CERo from time to time, including, among
others, market conditions, the trading price of the Common Stock and determinations by the Company as to the appropriate sources of funding
and New CERo's operations.
On any trading day, New CERo
may direct Arena to purchase amounts of its Common Stock up to the Commitment Amount. The maximum amount that the Company may specify
in any one Advance Notice is equal to: (A) if the Advance Notice is received by 8:30 a.m. Eastern time, then the maximum amount that the
Company may specify is equal to the lesser of (i) an amount equal to
60
% of the average Daily Value Traded of the Common Stock on the
ten trading days immediately preceding such Advance Notice, or (ii) $
20.0
million; and (B) if the Advance Notice is received after 8:30
a.m. Eastern time but prior to 10:30 a.m. Eastern time, then the maximum amount that the Company may specify in an Advance Notice is equal
to the lesser of: (i) an amount equal to
30
% of the average Daily Value Traded of the Common Stock on the ten trading days immediately
preceding such Advance Notice, or (ii) $
15.0
million. For these purposes, "Daily Value Traded" is the product obtained by
multiplying the daily trading volume of New CERo Common Stock on Nasdaq during regular trading hours by the VWAP for that trading day.
Under the applicable rules
of Nasdaq and the Purchase Agreement, New CERo will not sell or issue to Arena shares of Common Stock, inclusive of the Commitment Fee
Shares (as defined below), in excess of the Exchange Cap, unless the Company obtains stockholder approval to issue shares of Common Stock
in excess of the Exchange Cap. In any event, New CERo may not issue or sell any shares of Common Stock under the Purchase Agreement if
such issuance or sale would breach any applicable Nasdaq rules.
The Purchase Agreement also
prohibits the Company from directing Arena to purchase any shares of Common Stock if those shares, when aggregated with all other shares
of Common Stock then beneficially owned by Arena and its affiliates as a result of purchases under the Purchase Agreement, would result
in Arena and its affiliates having beneficial ownership of more than the
4.99
% of the then-outstanding Common Stock.
The purchase price of the
shares of Common Stock will be equal to
90
% of the lower of (i) the closing sale price of the Common Stock on the purchase date (ii) VWAP
of the Common Stock during the purchase date and (iii) the arithmetic average of the three lowest closing prices of the Common Stock during
the ten consecutive trading days ending on the trading day immediately preceding the purchase date.
As consideration for Arena's
irrevocable commitment to purchase Common Stock upon the terms of the Purchase Agreement, New CERo agreed to issue a number of shares
of Common Stock (the "Commitment Fee Shares") equal to
500,000
divided by the simple average of the daily VWAP of the Common
Stock during the five trading days immediately preceding the effectiveness of the registration statement with respect to the resale by
Keystone of the shares of Common Stock issuable pursuant to the Common Stock Purchase Agreement (the "Registration Statement").
In addition, New CERo has granted Arena customary registration rights related to the shares issued under the Purchase Agreement, and has
agreed to include the resale by Arena of the Commitment Fee Shares on the Registration Statement.
F-
49
Report of Independent Registered Public Accounting
Firm
To the Stockholders and the Board of Directors of CERo Therapeutics,
Inc.:
Opinion on the Financial Statements
We have audited the accompanying
balance sheets of CERo Therapeutics, Inc. (the "Company") as of December 31, 2023 and 2022, the related statements of operations,
convertible preferred stock and stockholders' deficit and cash flows for the years then ended, and the related notes to the financial
statements (collectively, the "financial statements"). In our opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows
for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Emphasis of a Matter Regarding Going Concern
The accompanying financial
statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements,
the Company has incurred net losses since its inception, and has negative cash flows from operations and will need additional funding
to complete planned development efforts. This raises substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters also are described in Note 1. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements
are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) ("PCAOB") and are required to be independent with respect to the Company in accordance with U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in
accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required
to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness
of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management,
as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for
our opinion.
/s/ Wolf & Company, P.C.
We have served as the Company's auditor
since 2023.
Boston, MA
April 1, 2024
F-
50
CERo Therapeutics, Inc.
Balance Sheets
December 31, 2023 and 2022
2023
2022
ASSETS
Cash, restricted cash, and cash equivalents
$
1,601,255
$
6,819,564
Prepaid expenses and other current assets
368,780
256,459
Total current assets
1,970,035
7,076,023
Operating lease right-of-use asset
2,189,565
2,846,041
Property and equipment, net
966,702
1,427,424
Total assets
$
5,126,302
$
11,349,488
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
Accounts payable
$
1,671,745
$
391,185
Accrued liabilities
144,633
100,394
Common stock subscription deposit
1,875
-
Operating lease liability
769,092
672,374
Short-term notes payable, net
599,692
-
Preferred stock warrant liability
320,117
-
Total current liabilities
3,507,154
1,163,953
Operating lease liability, net of current portion
1,575,499
2,344,590
Preferred stock warrant liability
-
610,381
Total liabilities
5,082,653
4,118,924
Commitments and contingencies
Convertible preferred stock, $
0.0001
par value per share, issuable in series:
Series Seed:
5,155,703
shares authorized, issued and outstanding; aggregate liquidation preference of $
4,154,981
at December 31, 2023
4,077,560
4,077,560
Series A:
24,614,402
shares authorized,
22,764,764
shares issued and outstanding; aggregate liquidation preference of $
39,999,967
at December 31, 2023
38,023,784
38,023,784
Total convertible preferred stock
42,101,344
42,101,344
Stockholders' deficit
Common stock, $
0.0001
par value,
45,350,000
shares authorized:
9,068,899
and
9,044,733
shares issued and outstanding at December 31, 2023 and 2022, respectively
907
904
Additional paid-in capital
1,031,219
928,560
Accumulated deficit
(
43,089,821
)
(
35,800,244
)
Total stockholders' deficit
(
42,057,695
)
(
34,870,780
)
Total liabilities, convertible preferred stock and stockholders' deficit
$
5,126,302
$
11,349,488
See accompanying notes to financial
statements.
F-
51
CERo Therapeutics, Inc.
Statements of Operations
For the years ended December 31, 2023 and 2022
2023
2022
Operating expenses:
Research and development
$
5,288,580
$
9,845,603
General and administrative
2,386,469
2,125,628
Total operating expenses
7,675,049
11,971,231
Loss from operations
(
7,675,049
)
(
11,971,231
)
Interest and other income, net
385,472
142,115
Net loss
$
(
7,289,577
)
$
(
11,829,116
)
Net loss per share:
Basic and diluted
$
(
0.80
)
$
(
1.32
)
Shares used in computing net loss per share:
Basic and diluted
9,058,025
8,974,247
See accompanying notes to financial statements.
F-
52
CERo Therapeutics, Inc.
Statements of Convertible Preferred Stock and
Stockholders' Deficit
For the years ended December 31, 2023 and 2022
Convertible Preferred Stock
Additional
Total
Series Seed
Series A
Common Stock
Paid-in
Accumulated
Stockholders'
Shares
Amount
Shares
Amount
Shares
Amount
Capital
Deficit
Deficit
Balance at December 31, 2021
5,155,703
$
4,077,560
22,764,764
38,023,784
8,974,421
897
541,872
(
23,971,128
)
(
23,428,359
)
Issuance of common stock from exercise of stock options
-
-
-
-
70,312
7
5,618
-
5,625
Stock-based compensation expense
-
-
-
-
-
-
381,070
-
381,070
Net loss
-
-
-
-
-
-
-
(
11,829,116
)
(
11,829,116
)
Balance at December 31, 2022
5,155,703
$
4,077,560
22,764,764
$
38,023,784
9,044,733
$
904
$
928,560
$
(
35,800,244
)
$
(
34,870,780
)
Issuance of common stock from exercise of stock options
-
-
-
-
24,166
3
5,763
-
5,766
Stock-based compensation expense
-
-
-
-
-
-
96,896
-
96,896
Net loss
-
-
-
-
-
-
-
(
7,289,577
)
(
7,289,577
)
Balance at December 31, 2023
5,155,703
$
4,077,560
22,764,764
$
38,023,784
9,068,899
$
907
$
1,031,219
$
(
43,089,821
)
$
(
42,057,695
)
See accompanying notes to financial statements.
F-
53
CERo Therapeutics, Inc.
Statements of Cash Flows
For the years ended December 31, 2023 and 2022
2023
2022
Cash flows from operating activities:
Net loss
$
(
7,289,577
)
$
(
11,829,116
)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense
460,722
476,275
Stock-based compensation
96,896
381,070
Amortization of right-to-use operating lease asset
656,476
596,534
Amortization of debt discount
35,655
-
Gain on revaluation of warrant liability
(
290,264
)
(
36,992
)
Change in assets and liabilities:
Prepaid expenses and other current assets
(
112,321
)
49,587
Accounts payable
1,280,560
(
68,734
)
Accrued liabilities
44,239
(
692,685
)
Operating lease liability
(
672,373
)
(
585,250
)
Net cash used in operating activities
(
5,789,987
)
(
11,709,311
)
Cash flows from investing activities:
Purchases of property and equipment
-
(
694,232
)
Net cash used in investing activities
-
(
694,232
)
Cash flows from financing activities:
Proceeds from issuance of convertible notes, net
605,230
-
Issuance costs for convertible notes
(
41,193
)
-
Common stock subscription deposit
1,875
-
Cash proceeds from exercise of stock options
5,766
5,625
Net cash provided by financing activities
571,678
5,625
Net decrease in cash, restricted cash, and cash equivalents
(
5,218,309
)
(
12,397,918
)
Cash, restricted cash, and cash equivalents at beginning of year
6,819,564
19,217,482
Cash, restricted cash, and cash equivalents at end of year
$
1,601,255
$
6,819,564
Supplemental disclosure of cash as reported within the audited condensed balance sheets:
Cash
$
1,518,676
$
6,651,454
Cash equivalents
2,823
88,354
Restricted cash
79,756
79,756
Cash, cash equivalents, and restricted cash
1,601,255
6,819,564
See accompanying notes to financial statements.
F-
54
CERo Therapeutics, Inc.
Notes to Financial Statements
NOTE 1 –
Organization
and Description of the Business
Nature of Operations
– CERo Therapeutics,
Inc. (the "Company") was incorporated in Delaware on September 23, 2016, and is based in South San Francisco, California.
The Company is focused on genetically engineering human immune cells to fight cancer. Since inception, the Company has focused on developing
its therapeutic platform and has not yet begun clinical development or product commercialization. Future Company efforts will focus on
continued product development, including clinical development, to support regulatory approval to commercialize and subsequent product
commercialization.
Going concern
– The accompanying
financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization
of assets and satisfaction of liabilities in the normal course of business. The Company's ability to continue as a going concern
is dependent on its ability to raise additional capital to fund its research and development ("R&D") activities and meet
its obligations on a timely basis. Since inception, the Company has incurred net losses and operating cash flow deficits, resulting in
an accumulated deficit of $
43.1
million as of December 31, 2023. Additional funds are necessary to maintain current operations and
to continue R&D activities. However, there can be no assurance that sufficient funding will be available to allow the Company to successfully
continue its R&D activities and planned regulatory filings with the Food and Drug Administration ("FDA"). If the Company
is unable to obtain necessary funds, significant reductions in spending and the delay or cancellation of planned activities may be necessary.
These actions would have a material adverse effect on the Company's business, results of operations, and prospects. These conditions
raise substantial doubt about the Company's ability to continue as a going concern within one year from the date these financial
statements are issued. The accompanying financial statements do not include any adjustments relating to the recoverability and classification
of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.
Risks and uncertainties
– The Company
is subject to all of the risks inherent in an early-stage biotechnology company. These risks include, but are not limited to, limited
management resources, intense competition, and dependence upon the availability of cash to sustain operations. The Company's operating
results may be materially affected by the foregoing factors.
The Company's research also requires approvals
from the FDA prior to beginning clinical trials and prior to product commercialization. There can be no assurance that the Company's
current ongoing research and future clinical development will result in the granting of these required approvals. If the Company is denied
such approvals or such approvals are substantially delayed, they could have a material adverse effect upon the Company's future
financial results and cash flows.
NOTE 2 –
Significant Accounting Policies
Use of estimates
– The preparation
of financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S.")
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent
liabilities at the date of the financial statements, and the reported amounts of expenses incurred during the reporting period. Items
subject to such estimates and assumptions include the estimates of the fair values of convertible preferred stock, common stock, and preferred
stock warrant liability, stock-based compensation expense, the present value of right-to-use assets and lease liabilities, and the valuation
allowance associated with deferred tax assets. Actual results could differ from those estimates.
Cash, restricted cash, and cash equivalents
– The Company considers all highly liquid investments with an original maturity from the date of purchase of three months or
less to be cash equivalents. As of December 31, 2023 and 2022, cash and cash equivalents consist of cash deposited with banks, including
a money market sweep account. Restricted cash consists of $
79,756
held on account by a financial institution as collateral for a demand
letter of credit issued as a real estate security deposit.
F-
55
CERo Therapeutics, Inc.
Notes to Financial Statements
Concentration of credit risk
– Financial
instruments that potentially subject the Company to credit risk consist primarily of cash, restricted cash, and cash equivalents. The
Company's cash, restricted cash, and cash equivalents are on deposit with two financial institutions that management believe are
of sufficiently high credit quality. Deposits at any of the Company's financial institutions may, at times, exceed federal insured
limits.
Property and equipment
– Property
and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated
useful lives of the respective assets, generally
three
to
five
years
or the remaining lease term for leasehold improvements, if shorter.
Expenditures for repairs and maintenance are charged to expense as incurred. Upon disposition, the cost and related accumulated depreciation
are removed from the accounts and the resulting gain or loss is reflected in the statements of operations.
Impairment of long-lived assets
–
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. When such an event occurs, management determines whether there has been an impairment by comparing the
anticipated undiscounted future net cash flows to the related asset's carrying value. If an asset is considered impaired, the asset
is written down to fair value, which is determined based either on discounted cash flows or appraised value, depending on the nature of
the asset. Through December 31, 2023, the Company has not experienced any impairment losses on its long-lived assets.
Leases –
The Company determines if
an arrangement contains a lease at inception. A lease is an operating or financing contract, or part of a contract, that conveys the right
to control the use of an identified tangible asset for a period of time in exchange for consideration.
At lease inception, the Company recognizes a lease
liability equal to the present value of the remaining lease payments, and a right of use asset equal to the lease liability, subject to
certain adjustments, such as for lease incentives. In determining the present value of the lease payments, the Company uses its incremental
borrowing rate, determined by estimating the Company's applicable, fully collateralized borrowing rate, with adjustment as appropriate
for lease term. The lease term at the lease commencement date is determined based on the non-cancellable period for which the Company
has the right to use the underlying asset, together with any periods covered by an extension option if the Company is reasonably certain
to exercise that option.
Right-of-use assets and obligations for leases
with an initial term of 12 months or less are considered short term and are (a) not recognized in the balance sheet and (b) recognized
as an expense on a straight-line basis over the lease term. The Company does not sublease any of its leased assets to third parties and
the Company's lease agreements do not contain any residual value guarantees or restrictive covenants.
The accounting for leases includes a number of
reassessment and re-measurement requirements for lessees based on certain triggering events or impairment conditions. There were no impairment
indicators identified during the years ended December 31, 2023 or 2022 that would require impairment testing of the Company's
right-of-use assets.
Certain of the Company's leases include
variable lease costs to reimburse the lessor for real estate tax and insurance expenses, and certain non-lease components that transfer
a distinct service to the Company, such as common area maintenance services. The Company has elected to separate the accounting for fixed
lease components and variable and non-lease components for real estate and equipment leases. The variable lease costs are recorded on
the statement of operations as rent expense, within general and administrative expenses. The Company does not have any financing leases
at December 31, 2023 or 2022.
Convertible preferred stock
– The
Company's convertible preferred stock is redeemable upon the liquidation or winding up of the Company, a change in control, or a
deemed liquidation event related to the sale of substantially all the assets of the Company. Based on the ownership of the Company's
equity and associated board of director control, deemed liquidation events are not solely within the control of the Company. As a result,
the shares of the Company's convertible preferred stock are considered contingently redeemable. The Company has elected to present
its convertible preferred stock as mezzanine equity in its balance sheet. Further, the Company has elected not to adjust the carrying
values of its convertible preferred stock to the redemption value of such shares, since it is uncertain whether or when a redemption event
will occur. Subsequent adjustments to increase the carrying values to the redemption values will be made when it becomes probable that
such redemption will occur. The Company has not included the effect of convertible preferred stock in the calculation of diluted loss
per share, since the inclusion of such convertible preferred stock would be anti-dilutive.
F-
56
CERo Therapeutics, Inc.
Notes to Financial Statements
Preferred stock warrant liability
–
Warrant accounting requires liability classification of warrants when the warrants include a conditional obligation, once the warrant
is exercised, that would require the Company to redeem its equity shares. As stated above, the shares of the Company's convertible
preferred stock are considered contingently redeemable and therefore, any preferred stock warrants to purchase preferred shares are classified
as a liability in the Company's balance sheets. The warrants are analyzed to determine whether the warrant is a freestanding instrument
and if so, whether the warrant was issued in a transaction with other instrument(s). If a freestanding warrant is issued with other instruments
in a single transaction, then the proceeds of the transaction are allocated first to the fair value of the warrant, with the remainder
being allocated to the other instruments. The warrants are remeasured as of each reporting period end, with any changes in fair value
recognized as interest and other income, net in the statement of operations. The Company has determined that the warrant liability is
a Level 3 instrument in the fair value measurements hierarchy. The Company has not included the effect of the preferred stock warrants
in the calculation of diluted loss per share since the inclusion of such warrants would be anti-dilutive.
Fair value measurements
– The Company's
assets and liabilities are carried at fair value. Fair value is the amount that would be received to sell an asset or paid to transfer
a liability in an orderly transaction between market participants on the measurement date. In determining fair value, the assumptions
that market participants would use in pricing an asset or liability (the inputs) are based on a tiered fair value hierarchy consisting
of three levels, as follows:
Level 1
–
Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
Level 2
–
Inputs (other than quoted prices included in Level 1) that are either directly or indirectly observable for the asset or liability. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3
–
Unobservable inputs for which there is little or no market data and which require the Company to develop its own assumptions about how market participants would price the asset or liability. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
Carrying amounts of certain of the Company's
financial instruments, including cash, restricted cash, and cash equivalents, prepaid expenses and other current assets, accounts payable,
and accrued liabilities approximate fair value due to their relatively short maturities.
Non-financial assets such as property and equipment
are evaluated for impairment and adjusted to fair value using Level 3 inputs only when impairment is recognized. Fair values are
considered Level 3 when management makes significant assumptions in developing a discounted cash flow model based upon a number of
considerations including projections of revenues, earnings, and a discount rate. To date, the Company has not recorded any adjustments
to fair value related to impairment on property and equipment.
F-
57
CERo Therapeutics, Inc.
Notes to Financial Statements
At December 31, 2023 and 2022, the fair value of the Company's
preferred stock warrant liability (see Note 7 for details) was classified as follows:
December 31, 2023
Level 1
Level 2
Level 3
Total
Preferred stock warrant liability
$
-
$
-
$
320,117
$
320,117
December 31, 2022
Level 1
Level 2
Level 3
Total
Preferred stock warrant liability
$
-
$
-
$
610,381
$
610,381
The change in the fair value measurement using significant inputs (Level 3)
is summarized below:
Balance at December 31, 2021
$
647,373
Gain on revaluation of warrant liability
(
36,992
)
Balance at December 31, 2022
$
610,381
Gain on revaluation of warrant liability
(
290,264
)
Balance at December 31, 2023
$
320,117
Research and development
– R&D
costs consist primarily of salaries and benefits, including stock-based compensation, occupancy, materials and supplies, contracted research,
consulting arrangements, and other expenses incurred in the pursuit of the Company's R&D programs. R&D costs are expensed
as incurred.
Stock-based compensation
– The Company
periodically issues common stock and stock options to officers, directors, and consultants for services rendered. Stock-based compensation
accounting requires the recognition of stock-based compensation expense, using a grant date fair value-based method, for costs related
to all share-based payments including stock options and restricted stock awards granted to employees and non-employees. Companies are
required to estimate the fair value of all share-based payment awards on the date of grant using an option pricing model, and the Company
uses a Black-Scholes option pricing model ("Black-Scholes") to estimate option award fair value. The fair value of restricted
stock awards is based upon the estimated share price of the common shares on the date of grant. Forfeitures are accounted for as they
occur, and the Company applies the simplified method to estimate expected term of "plain vanilla" options. All options and
restricted stock awards granted since inception are expensed on a straight-line basis over the requisite service period, which is usually
the vesting period, and the related amount is recognized in the statements of operations.
The accounting for stock options granted to outside
consultants is consistent with the accounting for stock-based payments to officers and directors, as described above, by measuring the
cost of services received in exchange for equity awards utilizing the grant date fair value of the awards, with the cost recognized as
stock-based compensation expense on the straight-line basis in the Company's financial statements over the vesting period of the
awards.
Income taxes
– The Company accounts
for income taxes under the liability method. Under this method, deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences
are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts
expected to be realized.
F-
58
CERo Therapeutics, Inc.
Notes to Financial Statements
The Company follows tax accounting requirements
for the recognition, measurement, presentation, and disclosure in the financial statements of any uncertain tax positions that have been
taken or expected to be taken on a tax return. No liability related to uncertain tax positions is recorded in the financial statements.
It is the Company's policy to include penalties and interest expense related to income taxes as a component of income tax expense,
as necessary. The Company has not recorded any interest or penalties associated with income tax since inception. Tax years subsequent
to 2020 are subject to examination by federal and state authorities.
Earnings per share –
The Company
reports both basic and diluted earnings per share. Basic earnings per share is calculated based on the weighted average number of shares
of common stock outstanding and excludes the dilutive effect of convertible preferred stock, convertible preferred stock warrants, stock
options or any other type of convertible securities. Diluted earnings per share is calculated based on the weighted average number of
shares of common stock outstanding and when the effect of stock options, warrants and other types of convertible securities is dilutive,
they are included in the calculation. Dilutive securities are excluded from the diluted earnings per share calculation if their effect
is anti-dilutive, such as in periods where the Company reports a net loss.
Recent accounting pronouncements not yet adopted
– In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives
and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an
Entity's Own Equity. This amends the ASC 815 Derivatives and Hedging—Contracts in Entity's Own Equity to simplify the
guidance on (1) accounting for convertible instruments, and (2) the derivatives scope exception for contracts in an entity's own
equity. The guidance on earnings per share ("EPS") has also been amended to simplify the calculations and make them more internally
consistent. The standard will be effective for nonpublic business entities beginning after December 15, 2023. The Company is currently
evaluating this new standard and the impact it will have on its financial statements, information technology systems, processes, and internal
controls.
NOTE 3 –
NET LOSS PER COMMON SHARE
The accounting standards require the presentation
of both basic and diluted earnings per share on the face of the statements of operations. The Company's basic net loss per share
is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period. If there are dilutive
securities, diluted income per share is computed by including common stock equivalents which includes shares issuable upon the exercise
of stock options into shares of common stock, exercise of preferred warrants into shares of preferred stock, and conversion of preferred
stock into shares of common stock, net of any shares assumed to have been purchased with the proceeds, using the treasury stock method.
In periods for which the Company reports a net loss, the common stock equivalents are not included, as they would be anti-dilutive.
The following table summarizes the number of shares
of common stock issuable upon conversion or exercise, as applicable, of convertible securities, warrants and restricted stock that were
not included in the calculation of diluted net loss per share because such shares are antidilutive:
Year ended December 31,
2023
2022
Common stock options
782,499
1,138,110
Convertible preferred stock
27,920,467
27,920,467
Convertible preferred warrants
1,849,638
1,849,638
30,552,604
30,908,215
Restricted common stock can be issued to directors,
executives or employees of the Company and are subject to time-based vesting. These potential shares are excluded from the computation
of basic loss per share as these shares are not considered outstanding until vested. No unvested restricted common stock awards were outstanding
at December 31, 2023 or 2022.
F-
59
CERo Therapeutics, Inc.
Notes to Financial Statements
NOTE 4 – PROPERTY AND EQUIPMENT
Property and equipment, net, consisted of the following as of December 31,
2023 and 2022:
2023
2022
Laboratory equipment
$
2,507,839
$
2,507,839
Computers
38,323
38,323
Furniture
8,429
8,429
Less: Accumulated depreciation
(
1,587,889
)
(
1,127,167
)
$
966,702
$
1,427,424
Depreciation expense was $
460,722
and $
476,275
for the years ended
December 31, 2023 and 2022, respectively.
NOTE 5 – ACCRUED LIABILITIES
Accrued liabilities consisted of the following as of December 31, 2023
and 2022:
2023
2022
Employee-related liabilities
$
68,697
$
19,758
Accrued legal expenses
46,466
18,040
Accrued interest
27,637
12,014
Accrued consulting expenses
1,833
50,582
$
144,633
$
100,394
NOTE 6 – Leases
As of December 31, 2023 and 2022, the Company
holds one five-year lease for laboratory and office space. The lease has escalating contractual rent and variable rent components and
the Company elects to separate the contractual and variable elements for valuing the lease liability and right-to-use asset. The lease
does not have any options for extension or expansion of the lease.
The Company recorded the following lease costs:
For the year ended
December, 31
2023
2022
Operating leases:
Operating lease cost
$
930,913
$
917,324
Variable lease cost
637,016
545,220
Total lease cost
$
1,567,929
$
1,462,544
Cash paid for amounts included in the measurement of lease liabilities
$
933,221
$
906,040
Right-of-use assets, net
2,189,565
2,846,041
Operating lease liabilities, current
769,092
672,374
Operating lease liabilities, non-current
1,575,499
2,344,590
Total operating lease liabilities
$
2,344,591
$
3,016,964
Weighted-average remaining lease term of operating leases (in years)
2.75
3.75
Weighted-average discount rate for operating leases
9.60
%
9.60
%
F-
60
CERo Therapeutics, Inc.
Notes to Financial Statements
The interest expense related to leases was $
260,848
and $
320,790
for years ended December 31, 2023 and 2022, respectively.
The following table reconciles the undiscounted
future minimum lease payments (displayed by year and in the aggregate) under noncancelable operating leases with terms of more than one
year to the total operating lease liabilities recognized on the balance sheets as of December 31, 2023:
Year ending December 31:
Operating
Leases
2024
961,218
2025
990,055
2026
726,394
Total lease payments
2,677,667
Less imputed interest
(
333,076
)
Total lease liabilities
$
2,344,591
NOTE
7 – CONVERTIBLE PREFERRED STOCK
The Company had
75,120,105
shares of capital stock
authorized as of December 31, 2023 and 2022, consisting of
45,350,000
shares of common stock and
29,770,105
shares of convertible
preferred stock. All classes of the Company's stock have a par value of $
0.0001
. On February 14, 2024, on the close of the business
combination (the "Business Combination"), pursuant to the Business Combination Agreement, dated as of June 4, 2023, as amended
from time to time (as amended, the "Business Combination Agreement") by and among the Company, Phoenix Biotech Acquisition
Corp. ("PBAX") and PBCE Merger Sub, Inc. ("Merger Sub"), the outstanding convertible preferred stock converted
to CERo Therapeutics Holdings, Inc. ("New CERo") common stock at a conversion ratio equal to
0.0806
and
0.1757
shares of New
CERo common stock, par value $
0.0001
per share ("New CERo Common Stock") for each share of Series Seed convertible preferred
stock ("Series Seed Preferred Stock") and Series A convertible preferred stock ("Series A Preferred Stock"),
respectively, resulting in the issuance of
415,498
and
3,999,997
common shares for the Series Seed Preferred Stock and Series A Preferred
Stock, respectively (see Note 15).
At December 31, 2023 and 2022, convertible
preferred stock consisted of the following:
Shares authorized
Shares
issued and
outstanding
Liquidation amount
Series Seed
5,155,703
5,155,703
$
4,154,981
Series 1
100
-
-
Series A
24,614,402
22,764,764
39,999,967
29,770,205
27,920,467
$
44,154,948
Series 1 Convertible Preferred Stock – The
Company issued
100
shares of Series 1 preferred stock ("Series 1 Preferred Stock") in 2018, which was subsequently converted
on November 14, 2019 into
2,845,597
shares of Series A Preferred Stock. There were no shares of Series 1 Preferred Stock outstanding in
the years ended December 31, 2023 or 2022.
Series Seed and Series A Preferred Stock –
Holders have various rights and preferences as follows:
Voting rights
– The holders of convertible
preferred stock are entitled to vote on all matters on which the common stockholders are entitled to vote. Holders of convertible preferred
stock and common stock vote together as a single class. Each holder of convertible preferred stock is entitled to the number of votes
equal to the number of shares of common stock into which the shares held by such holder are convertible.
Dividends
– Dividends are payable
when and if declared by the board of directors (the "Board of Directors"), and preferred stockholders have preference over
common stockholders for the payment of dividends. The holders of Series Seed Preferred Stock and Series A Preferred Stock are
entitled to receive, when and if declared by the Board of Directors, noncumulative dividends at a rate of $
0.0645
and $
0.1406
, respectively,
per share, per annum, adjustable for certain events, such as stock splits and combinations. No dividends have been declared or paid by
the Company to date.
F-
61
CERo Therapeutics, Inc.
Notes to Financial Statements
Liquidation
– Upon the occurrence
of a liquidation, dissolution, or winding up of the Company, either voluntary or involuntary, the holders of Series A Preferred Stock
then outstanding shall be entitled to be paid, out of the available funds and assets, and prior and in preference to any payment or distribution
of any such funds on any shares of Series Seed Preferred Stock, and common stock, an amount per share equal to $
1.7571
, plus all
declared but unpaid dividends.
Upon the completion of the distribution described
above, the holders of Series Seed Preferred Stock then outstanding shall be entitled to receive, out of the available funds and assets,
in preference to any distribution of any of the assets to holders of common stock, an amount equal to the original issue price for such
series of convertible preferred stock, $
0.8059
, plus any declared but unpaid dividends.
Thereafter, any remaining proceeds shall be distributed
among the holders of common stock pro rata based on the number of shares held by each such holder.
Conversion
– Each share of convertible
preferred stock is convertible into common stock: (i) at the option of the holder; (ii) at the closing of an initial public
offering of the Company's common stock at a price not less than $
3.5142
per share and having aggregate cash proceeds of not less
than $
60,000,000
; and (iii) at the date specified by written consent or agreement of the holders of at least
60
% of the outstanding
shares of Series A Preferred Stock, voting together as a single class. The conversion ratio for the conversion in the above scenarios
is currently
100
%, determined by dividing the original issue price per share by the conversion price per share, which are each $
0.8059
for Series Seed Preferred Stock and each $
1.7571
for Series A Preferred Stock.
Redemption
– Convertible preferred
stock is not mandatorily redeemable and is contingently redeemable only on defined liquidation events not solely in the control of the
Company and without fixed or determinable dates.
NOTE
8 – CONVERTIBLE PREFERRED STOCK Warrant liability
On November 14, 2019, the Company issued warrants
to purchase a total of
1,849,638
shares of Series A Preferred Stock at a price of $
1.7571
per share. The warrants are exercisable into
shares of Series A Preferred Stock at the discretion of the holder, at any time in the
five years
after issuance. The warrants were
analyzed and determined to be freestanding instruments issued in a transaction including the conversion or sale of Series A Preferred
Stock. A warrant to purchase up to
426,839
shares of Series A Preferred Stock was issued in a transaction that included the conversion
of
100
shares of Series 1 Preferred Stock into
2,845,597
shares of Series A Preferred Stock. Another warrant to purchase up to
1,422,799
shares of Series A Preferred Stock was issued concurrent with the purchase of
2,845,597
shares of Series A Preferred Stock. These warrants
are collectively are referred to as the "preferred stock warrants." On February 14, 2024, the preferred stock warrants were
converted into warrants to purchase up to
324,999
shares of New CERo Common Stock.
The Company initially recorded the warrants at
fair value as valued by a third-party appraiser, who estimated fair value using with estimates of the value and volatility of the Company's
Series A Preferred Stock as well as estimation of the risk-free rate.
The appraiser subsequently estimated the fair value of the preferred
stock warrants at December 31, 2023 and 2022, using Black-Scholes with the following assumptions:
December 31,
2023
2022
Risk-free interest rate
5.4
%
4.7
%
Expected life (in years)
0.25
1.0
Expected dividend yield
-
%
-
%
Expected volatility
65.9
%
85.0
%
At December 31, 2023 and 2022, the preferred
stock warrants were exercisable and remained outstanding.
F-
62
CERo Therapeutics, Inc.
Notes to Financial Statements
NOTE
9 – COMMON STOCK
In September 2016, the Company issued
8,500,000
shares of common stock to the founders ("Founder Stock") in exchange for consideration payable by cash and by transfer of
certain technology and related rights owned by the founders. The Founder Stock vested ratably over a four-year period following the date
of issuance. As of December 31, 2022, all Founders Stock was fully vested.
The holders of common stock are also entitled
to receive dividends whenever funds are legally available, when and if declared by the Board of Directors. As of December 31, 2023,
dividends have never been declared.
At December 31, 2023 and 2022, the Company
had reserved common stock for future issuance as follows:
December 31,
2023
2022
Convertible preferred stock, authorized but not yet issued
1,849,738
1,849,738
Conversion of convertible preferred stock issued and outstanding
27,920,467
27,920,467
Stock Incentive Plan:
Awards available for grant
3,537,004
3,205,559
Outstanding stock options
782,499
1,138,110
34,089,708
34,113,874
NOTE
10 – STOCK-BASED COMPENSATION
In October 2016, the Company's Board of
Directors approved the adoption of an Equity Incentive Plan ("EIP"). As amended, the EIP permits the Company to grant awards
allowing for the issuance of up to
4,888,402
shares of the Company's common stock.
The EIP provides for the grant of incentive and
non-statutory stock options and restricted stock awards to employees, non-employee directors, and consultants of the Company. Stock options
and restricted stock awards granted under the EIP generally vest
25
% on the first anniversary of the grant, then monthly to the fourth
anniversary of the date of grant. All awards expire ten years from the date of grant. Options are exercisable only to the extent vested.
The per share purchase price of all restricted stock and the exercise price of all stock options granted under the EIP must be at least
equal to
100
% of the fair value of the Company's common stock at the date of grant, as determined by the Board of Directors.
Stock option activity for the years ended December 31,
2023 and 2022, was as follows:
Outstanding
Shares
Weighted
Average Exercise
Price Per Share
Weighted Average
Remaining
Contractual Life
(in years)
Balance, December 31, 2022
1,138,110
$
0.29
8.18
Options exercised
(
24,166
)
$
0.24
Options cancelled/forfeited/expired
(
331,445
)
$
0.31
Balance, December 31, 2023
782,499
$
0.27
6.86
Exercisable
651,663
$
0.28
6.60
The intrinsic value of options exercised during
the years ended December 31, 2023 and 2022 was $
9,458
and $
35,859
, respectively.
F-
63
CERo Therapeutics, Inc.
Notes to Financial Statements
No options were granted in 2023, and the Company
estimated the fair value of stock options granted during the year ended December 31, 2022, using Black-Scholes with the following
weighted average assumptions:
2022
Risk-free interest rate
2.28
%
Expected life (in years)
8.30
Expected dividend yield
0.0
%
Estimated volatility
71.31
%
●
The common stock expected dividend yield assumption of
0.0
% is based on the Company's history and expectation of no dividend payouts to common stock.
●
The risk-free interest rate assumption is based on the U.S. Department of Treasury instruments whose term was most consistent with the expected life of the Company's stock options.
●
The expected stock price volatility assumption was determined by examining the historical volatilities for industry peers, as the Company does not have any public trading history for the Company's common stock. The Company will continue to analyze the historical stock price volatility and expected term assumption as more historical data for the Company's common stock becomes available.
●
The expected lives of stock options are estimated based on the type of award issued using approaches that do not rely on the historical data of the Company, as management has concluded there is insufficient data to provide a reasonable forward-looking estimate. The expected life of an incentive stock option is estimated using the simplified method described in Staff Accounting Bulletin Topic 14 – Share-Based Payment. All incentive stock options awarded by the Company have terms consistent with this approach, which is to calculate the weighted average midpoint between the vesting date of each vesting tranche and the termination date of the option. Non-qualified stock options are valued using the contractual life as the expected term.
For the year ended December 31, 2023, the
Company recorded stock-based compensation expense of $
96,896
, of which $
91,664
was related to R&D and $
5,232
was related to general
and administrative.
For the year ended December 31, 2022, the
Company recorded stock-based compensation expense of $
381,070
, of which $
294,164
was related to R&D and $
86,906
was related to general
and administrative.
As of December 31, 2023, there was $
79,526
of unamortized stock-based compensation cost related to unvested stock options, which is expected to be recognized over a weighted average
period of
1.05
years. No options were granted in 2023, and the weighted average grant date calculated fair value per share of options
granted during the year ended December 31, 2022, was $
0.50
.
NOTE
11 – INCOME TAXES
The components of the net deferred tax assets were approximately as
follows as of December 31, 2023 and 2022:
2023
2022
Net operating loss carryforwards
$
9,067,000
$
5,600,000
Section 174 research and development capitalization
2,490,000
1,807,000
Research credits
1,535,000
1,364,000
Fixed assets and intangible assets
401,000
321,000
Right of use asset
(
613,000
)
(
598,000
)
Lease liability, net
657,000
634,000
Accruals and others
66,000
42,000
13,603,000
9,170,000
Less: valuation allowance
(
13,603,000
)
(
9,170,000
)
Net deferred tax assets
$
-
$
-
F-
64
CERo Therapeutics, Inc.
Notes to Financial Statements
The Company has incurred significant tax losses
since inception. Based on the available objective evidence, management cannot conclude it is more likely than not that the net deferred
tax assets will be fully realizable. Accordingly, the Company has provided a full valuation allowance against its net deferred tax assets.
For the years ended December 31, 2023 and 2022, the valuation allowance increased by approximately $
4,433,000
and $
2,964,000
, respectively.
At December 31, 2023, the Company has federal
net operating loss carryforwards of approximately $
727,000
that begin to expire in 2036. The Company also has federal net operating losses
of $
28,973,000
that arose after the 2017 tax year that will carry forward indefinitely and the utilization of which is limited to
80
%
of taxable income for tax years beginning after 2021. The Company has state net operating loss carryforwards of approximately $
40,522,000
that will begin to expire in 2036.
Under the Tax Reform Act of 1986, the amounts
of and benefits from net operating loss carry forwards may be impaired or limited in certain circumstances. Events which cause limitations
in the amount of net operating losses that the Company may utilize in any one year include, but are not limited to, a cumulative ownership
change of more than
50
%, as defined, over a three-year period. The impact of any limitations that may be imposed due to such ownership
changes has not been determined.
As of December 31, 2023, the Company has research
credit carry forwards of approximately $
930,000
and $
1,296,000
for federal and state tax purposes, respectively. If not utilized, the
federal carryforward will expire in various amounts beginning in 2040. The California credits can be carried forward indefinitely. The
Company has not undertaken a detailed analysis of all amounts claimed as research credits for federal or state tax purposes. As a result,
amounts ultimately realized for research credits were included in management's consideration of uncertain tax benefits.
As of December 31, 2023 and 2022, the Company
had an unrecognized tax benefit balance of approximately $
459,000
and $
427,000
, respectively, related to R&D credits.
No amount of unrecognized tax benefits as of December
31, 2023 and 2022, if recognized, would reduce the Company's effective tax rate because the benefits would be in the form of tax
credit carryforwards, which would attract a full valuation allowance. There are no provisions for which it is reasonably possible that
the total amounts of unrecognized tax benefits will significantly increase or decrease within 12 months of the reporting date. Because
the statute of limitations does not expire until after the net operating loss and credit carryforwards are actually used, the statutes
are still open on calendar years ended 2016 and 2017 forward for federal and state purposes.
The Company did not recognize any expense for
interest and penalties related to uncertain tax positions during 2023 and 2022, and the Company does not have any amounts related to interest
and penalties accrued at December 31, 2023 and 2022.
The Company files U.S. federal and state tax returns.
The Company's tax years will remain open for examination by the federal and state authorities for three and four years, respectively,
from the date of utilization of any net operating loss credit.
A reconciliation of the beginning and ending amount
of the liability for uncertain tax positions, excluding potential interest and penalties, is as follows:
Balance as of December 31, 2022
$
427,000
Increase/(decrease) based on current year tax positions
17,000
Increase/(decrease) for prior year tax positions
15,000
Lapses of applicable statutes
-
Balance as of December 31, 2023
$
459,000
F-
65
CERo Therapeutics, Inc.
Notes to Financial Statements
NOTE
12 – COLLABORATIVE AGREEMENTS
The Company entered into a Collaboration and Option
Agreement (the "Collaboration Agreement") dated March 3, 2020. The Collaboration Agreement granted a royalty-free, nonexclusive,
worldwide license to share each party's technologies to create bi-functional T-cells. The Company was responsible for all employee
and other internal costs incurred in the performance of all the Company's R&D activities, with approved cost overruns funded
by the collaborative partner. At the end of the research project, the collaborative partner will be granted the option to enter into an
exclusive license for the further development of the combined drug. The Company recognizes the allocation of the costs incurred with respect
to the jointly conducted activities as a component of the related expense in the period incurred. The Company ensured that the presentation,
classification, and disclosure requirements related to the Collaboration Agreement were followed. Costs incurred related to the Collaboration
Agreement are included in R&D costs in the statements of operations, and expense reimbursements of approximately $
0
and $
182,577
were
netted against those costs for the years ended December 31, 2023 and 2022, respectively. The Collaboration Agreement was terminated
on March 3, 2023.
NOTE
13 – 401(k) RETIREMENT SAVINGS PLAN
The Company sponsors a 401(k) defined contribution
plan covering eligible employees who elect to participate. The Company is allowed to make discretionary profit sharing and 401(k) matching
contributions as defined in the plan and as approved by the Board of Directors. The Company made $
63,344
and $
139,804
contributions during
2023 and 2022, respectively.
NOTE
14 – RELATED-PARTY TRANSACTIONS
A founder, investor and board observer, has a
family relation with the chief executive officer and the chief financial officer in office in 2022. At December 31, 2023, this individual
maintained
16.33
% of the outstanding and
14.99
% of the fully diluted ownership of the Company. In addition, this individual was under
a consulting contract in 2022 to advise on research and clinical strategy as the head of the scientific advisory board, for which the
individual was paid $
50,000
in the year ending December 31, 2022 and $
0
in 2023.
An investor had a working relationship with the
Company under the Collaboration Agreement described in Note 11 and was actively collaborating with the Company in the year ended December
31, 2022. At December 31, 2023, this investor maintained
7.69
% of the outstanding and
9.89
% of the fully diluted ownership of the
Company.
NOTE
15 – SUBSEQUENT EVENTS
Business Combination
On February 5, 2024, the Company, PBAX and Merger
Sub entered into Amendment No. 1 to the Business Combination Agreement (the "First BCA Amendment") to, among other things,
(i) remove the minimum cash condition, (ii) modify the stock-price based milestones such that (a) the trading price condition for the
First Level Earnout Target (as defined in the First BCA Amendment) shall be reset from $
12.50
to
125
% of the reset Conversion Price (as
defined in the First BCA Amendment) of the New CERo Series A Preferred Stock (as defined below) and (b) the trading price condition for
the Second Level Earnout Target (as defined in the First BCA Amendment) shall be reset from $
15.00
to
150
% of the reset Conversion Price
of New CERo Series A Preferred Stock, and (iii) increase the aggregate number of shares of PBAX Class A common stock, par value $
0.0001
per share ("Class A common stock"), issuable to the stockholders of the Company in connection with the Business Combination
from
4,651,704
shares to
5,000,000
shares. Such number of shares is in addition to up to
1,200,000
shares issuable upon satisfaction of
certain earn-out conditions and
382,651
shares issuable upon exercise of rollover options or warrants.
F-
66
CERo Therapeutics, Inc.
Notes to Financial Statements
On February 8, 2024, PBAX held a special meeting
of stockholders (the "Fourth Special Meeting"). At the Fourth Special Meeting, PBAX's stockholders adopted and approved
(i) the Business Combination Agreement, pursuant to which Merger Sub merged with and into the Company, with the Company surviving as a
wholly-owned subsidiary of PBAX and approved the Business Combination and the other transactions and ancillary documents contemplated
by and required for the Business Combination; (ii) on a non-binding advisory basis, certain changes to the amended and restated charter
of PBAX, including the name change of Phoenix Biotech Acquisition Corp. to CERo Therapeutics Holdings, Inc., share authorizations, and
others; (iii) the issuance of Class A common stock to the Company's stockholders pursuant to the Business Combination Agreement;
(iv) the election of five directors; and (v) the 2024 Equity Incentive Plan and the 2024 Employee Stock Purchase Plan (in each case, as
defined in the Business Combination Agreement), contingent of the consummation of the Business Combination.
In connection with the approval of the Business
Combination, holders of
671,285
shares of Class A common stock, exercised redemption rights. As a result, following satisfaction of such
redemptions, PBAX had
5,563,297
shares of Class A common stock outstanding, of which (i)
82,047
were shares of Class A common stock issued
to the public in its initial public offering ("IPO"), which shares of Class A common stock were entitled to receive a pro
rata portion of the remaining funds in the PBAX trust account in connection with its initial business combination, a liquidation or certain
other events, (ii)
4,596,250
were shares of Class A common stock issued upon the conversion of an equal number of shares of PBAX Class
B common stock, par value $
0.0001
per share ("Class B common stock"), acquired by Phoenix Biotech Sponsor, LLC (the "Sponsor")
prior to its IPO, which shares of Class A common stock did not have redemption rights, and (iii)
885,000
were shares of Class A common
stock included in the private placement units acquired in the private placement by the Sponsor and other investors concurrent with the
PBAX IPO, which shares of Class A common stock did not have redemption rights. On February 14, 2024, PBAX made a series of payments of
an aggregate of $
7,456,463.30
to holders of redeemed Class A common stock (an aggregate of $
11.11
per redeemed share).
On February 13, 2024, the Company, PBAX and Merger
Sub entered into Amendment No. 2 to the Business Combination Agreement to create two additional pools of earnout shares (the "Earnout
Shares") of Class A common stock, one pool of which will contain
875,000
shares, which will be fully vested at closing of the Business
Combination and which are being issued as an offset to the agreement by Sponsor to forfeit an offsetting number of shares, and one pool
of which will contain
1,000,000
shares, which will be fully vested upon the achievement of certain regulatory milestone-based earnout
targets and make certain other technical changes to the timing and process for issuance of the
1,200,000
shares of Class A common stock
subject to the other earn-out conditions set forth in the Business Combination Agreement.
The Business Combination closed on February 14,
2024, at which time the following occurred:
1.
Each outstanding share of the Company's convertible preferred stock was converted into the number of shares of Class A common stock calculated by dividing the liquidation preference by $
10.00
.
2.
Each outstanding share of the Company's common stock was converted into the number of shares of Class A common stock calculated by multiplying each share by the exchange ratio (the "Exchange Ratio"). The Exchange Ratio of
0.064452
was calculated by first subtracting the aggregate liquidation preference of outstanding preferred shares from $
50
million, then dividing the result by the number of shares of the Company's common stock outstanding and dividing by $
10.00
per share.
3.
Each holder of the Company's common stock received a pro rata portion of up to
1.2
million Earnout Shares,
1,000,000
of which are subject to vesting upon the achievement of certain stock price-based earnout targets and
200,000
of which are subject to vesting upon a change of control, respectively.
4.
Certain holders of the Company's common stock received a pro rata portion of
875,000
Earnout Shares, which became fully vested upon the closing of the Business Combination.
F-
67
CERo Therapeutics, Inc.
Notes to Financial Statements
5.
Certain holders of the Company's common stock received a pro rata portion of up to
1.0
million Earnout Shares, which are subject to vesting upon the Company's filing an investigational new drug application with the FDA.
6.
Each outstanding Company option was converted into an option to purchase a number of shares of Class A common stock, equal to the Company's common shares underlying the option multiplied by the Exchange Ratio, at an exercise price per share equal to the Company option exercise price divided by the Exchange Ratio.
7.
Each warrant to purchase the Company's convertible preferred stock was converted into a warrant to acquire a number of shares of Class A common stock obtained by dividing the warrant as-if-exercised liquidation preference by $
10.00
, with the exercise price equal to the total Company warrant exercise amount divided by the number of shares of Class A common stock issuable upon exercise.
8.
The Company's convertible notes automatically converted into shares of New CERo Series A Preferred Stock, at a conversion price equal to $
1,000
per share.
PIPE Financing
In February 2024, New CERo consummated a private
placement of
10,039
shares of New CERo Series A Preferred Stock, par value $
0.0001
per share (the "New CERo Series A Preferred Stock"),
warrants to purchase
612,746
shares of common stock (the "Common Warrants") and warrants to purchase
2,500
shares of Series
A Preferred Stock (the "Preferred Warrants" and, together with the Common Warrants, the "PIPE Warrants"), pursuant
to the Amended and Restated Securities Purchase Agreement, dated February 14, 2024, by and among the Company, PBAX and certain accredited
investors (the "Initial Investors") for aggregate cash proceeds to New CERo of approximately $
10.0
million. On April 1, 2024,
we consummated a private placement of
626
shares of Series B Preferred Stock, pursuant to the Securities Purchase Agreement, dated March
28, 2024, by and among us and certain accredited investors (the "Additional Investors" and, together with the Initial Investors,
the "PIPE Investors"), for aggregate cash proceeds to us of approximately $
0.5
million. Such private placement is expected
to close on or around April 1, 2024. A portion of such Series A Preferred Stock was issued as consideration for the cancellation of outstanding
indebtedness or securities of the Company, including a promissory note of PBAX and the Company's convertible notes. Such transactions
collectively are referred to as the "PIPE Financing."
F-
68
Up to [_________] Shares of Common Stock
Pre-Funded Warrants to Purchase up to [___]
Shares of Common Stock
Common Warrants to Purchase up to [___] Shares
of Common Stock
Up to [___] Shares of Common Stock Issuable
Upon Exercise of Pre-Funded Warrants and Common Warrants
CERO THERAPEUTICS HOLDINGS, INC.
PROSPECTUS
,
2024
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13
.
Other Expenses of Issuance and Distribution
.
The following table sets forth the estimated expenses
to be borne by the registrant in connection with the securities being registered hereby.
Expense
Estimated
Amount
Securities and Exchange Commission
    registration fee
$
3,062.00
FINRA filing fee
$
*
Accounting fees and expenses
$
*
Legal fees and expenses
$
*
Financial printing and miscellaneous expenses
$
*
Total
$
*
*
These fees are calculated based on the securities offered and
the number of issuances and accordingly cannot be defined at this time.
Item 14
.
Indemnification of Directors and Officers
Section 145(a) of the DGCL
provides, in general, that a corporation may indemnify any person who was or is a party to or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation), because he or she is or was a director, officer, employee or agent of the corporation, or is or
was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually
and reasonably incurred by the person in connection with such action, suit or proceeding, if he or she acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his or her conduct was unlawful.
Section 145(b) of the DGCL
provides, in general, that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor because the person is or
was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys'
fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if he or she
acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, except
that no indemnification shall be made with respect to any claim, issue or matter as to which he or she shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of Chancery or other adjudicating court determines that, despite
the adjudication of liability but in view of all of the circumstances of the case, he or she is fairly and reasonably entitled to indemnity
for such expenses that the Court of Chancery or other adjudicating court shall deem proper.
Section 145 of the DGCL further
provides that to the extent a director or officer of a corporation has been successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to in Section 145(a) or (b) of the DGCL, or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection
therewith; that indemnification provided for by Section 145 of the DGCL shall not be deemed exclusive of any other rights to which the
indemnified party may be entitled; and the indemnification provided for by Section 145 of the DGCL shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit
of such person's heirs, executors and administrators. Section 145(g) of the DGCL provides, in general, that a corporation may purchase
and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust
or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out
of his or her status as such, whether or not the corporation would have the power to indemnify the person against such liability under
Section 145 of the DGCL.
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Section 102(b)(7) of the
DGCL provides that a corporation's certificate of incorporation may contain a provision eliminating or limiting the personal liability
of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director; provided that such
provision shall not eliminate or limit the liability of a director (i) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the DGCL or (iv) for any transaction from which the director derived an improper personal benefit.
Additionally, our Charter
and Bylaws limit the liability of our (i) directors and (ii) officers, which includes each individual who has been duly appointed as an
officer of CERo and who, at the time of an act or omission as to which liability is asserted, is deemed to have consented to service of
process to our registered agent as contemplated by Section 3114(b) of Title 10 of the DGCL, in each case, to the fullest extent permitted
by the DGCL, and also provides that we indemnify our directors and officers to the fullest extent permitted by the DGCL.
In connection with the Closing,
we entered into indemnification agreements with each of our directors and executive officers. These agreements provide that we indemnify
each of our directors and officers to the fullest extent permitted by law and our Charter and Bylaws, and provides for advancement of
expenses incurred as a result of any proceeding against them as to which they could be indemnified.
We also maintain a general
liability insurance policy, which covers certain liabilities of our directors and officers arising out of claims based on acts or omissions
in their capacities as directors or officers.
Item 15
.
Recent Sales of Unregistered
Securities
.
In February 2024, May 2024
and August 2024, we issued 119,050, 250,351 and 1,613,944 shares of Common Stock, respectively, to an investor as commitment shares in
consideration for entering into an equity line of credit with us. The issuance of these securities was made pursuant to
Section 4(a)(2) of the Securities Act, and the rules promulgated thereunder, to an accredited investor. As of the date of this prospectus,
we have issued an aggregate of 23,377,921 shares of Common Stock to such investor pursuant to the equity line of credit.
In February 2024, we issued
an aggregate of 10,039 shares of Series A Preferred Stock, at a price of $1,000 per share, initially convertible into 1,039,000 shares
of Common Stock at $10.00 per share, and 2,500 Preferred Warrants, resulting in aggregate gross proceeds to us of approximately $10.1
million. Such issuance includes 2,180 shares of Series A Preferred Stock, initially convertible into 2,180,000 shares of Common Stock,
that were issued to certain investors in exchange for consideration consisting of approximately $2.16 million aggregate outstanding principal
amount, together with accrued and unpaid interest thereon of approximately $0.02 million, of certain convertible promissory notes issued
in June 2023 by Legacy CERo and a promissory note issued in December 2022, as amended in December 2023, by PBAX. As additional consideration
to certain investors, we also issued 612,746 Series A Warrants as a structuring fee. In March 2024, with the consent of the applicable
investors, a portion of the shares of Series A Preferred Stock and Series A Warrants was cancelled and reissued to the purchasers of Series
B Preferred Stock described below.
In March 2024, we issued
an aggregate of 626 shares of Series B Preferred Stock, at a price of $1,000 per share, initially convertible into 62,600 shares of Common
Stock at $10.00 per share, resulting in aggregate gross proceeds to us of approximately $0.5 million.
In May 2024, we issued 345,566
shares of Common Stock to an investor as commitment shares in consideration for entering into an equity line of credit
with us. The issuance of these securities was made pursuant to Section 4(a)(2) of the Securities Act, and the rules promulgated thereunder,
to an accredited investor.
In September 2024, we issued
an aggregate of 2,853 shares of Series C Preferred Stock, at a price of $1,000 per share, and 8,175,166 shares of Series C Warrants, resulting
in aggregate gross proceeds to us of approximately $1.25 million.
The issuance of these securities
was made pursuant to 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D, and the rules promulgated thereunder, to accredited
investors.
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Item 16
.
Exhibits and Financial Statements Schedules
.
(a) Exhibits.
Exhibit
Number
Description
2.1
Business Combination Agreement, dated as of June 4, 2023, by and among Phoenix Biotech Acquisition Corp., PBCE Merger Sub, Inc. and CERo Therapeutics, Inc., as amended (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by Phoenix Biotech Acquisition Corp. with the Securities and Exchange Commission on June 5, 2023).
2.2
Amendment No. 1 to the Business Combination Agreement, dated as of February 5, 2024, by and among Phoenix Biotech Acquisition Corp., PBCE Merger Sub, Inc. and CERo Therapeutics, Inc. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by Phoenix Biotech Acquisition Corp. with the Securities and Exchange Commission on February 6, 2024).
2.3
Amendment No. 2 to the Business Combination Agreement, dated as of February 13, 2024, by and among Phoenix Biotech Acquisition Corp., PBCE Merger Sub, Inc. and CERo Therapeutics, Inc. (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K filed by Phoenix Biotech Acquisition Corp. with the Securities and Exchange Commission on February 13, 2024).
3.1
Second Amended and Restated Certificate of Incorporation of CERo Therapeutics Holdings, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K/A filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on February 27, 2024).
3.2
Second Amended and Restated Bylaws of CERo Therapeutics Holdings, Inc. (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K/A filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on February 27, 2024).
3.3
Certificate of Designation of Preferences, Rights and Limitations of the Series A Convertible Preferred Stock (incorporated by reference to Exhibit 3.3 to the Current Report on Form 8-K/A filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on February 27, 2024).
3.4
Certificate of Correction to Certificate of Designation of Preferences, Rights and Limitations of the Series A Convertible Preferred Stock (incorporated by reference to Exhibit 3.4 to the Current Report on Form 8-K/A filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on February 27, 2024).
3.5
Second Certificate of Correction to Certificate of Designation of Preferences, Rights and Limitations of the Series A Convertible Preferred Stock (incorporated by reference to Exhibit 3.5 to the Current Report on Form 8-K/A filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on February 27, 2024).
3.6
Certificate of Designation of Preferences, Rights and Limitations of the Series B Convertible Preferred Stock (incorporated by reference to Exhibit 3.6 to the Annual Report on Form 10-K filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on April 2, 2024).
3.7
Certificate of Designation of Preferences, Rights and Limitations of the Series C Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on October 2, 2024).
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4.1
Warrant Agreement, by and between Phoenix Biotech Acquisition Corp. and Continental Stock Transfer & Trust Company, dated October 5, 2021 (incorporated by reference to Exhibit 4.4 to the Registration Statement on Form S-1 filed by Phoenix Biotech Acquisition Corp. with the Securities and Exchange Commission on September 13, 2021).
4.2
Form of Common Warrant (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K/A filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on February 27, 2024).
4.3
Form of Preferred Warrant (incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K/A filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on February 27, 2024).
4.5
Description of Securities (incorporated by reference to Exhibit 4.5 to the Registration Statement on Form S-1 filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on October 21, 2024).
4.6
Form of Warrant (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on September 25, 2024).
4.7**
Form of Common Warrant.
4.8**
Form of Pre-Funded Warrant.
5.1**
Opinion of Goodwin Procter LLP as to the validity of the securities being registered.
10.1+
CERo Therapeutics, Inc. 2016 Equity Incentive Plan, as amended (incorporated by reference to Exhibit 10.1 to the Registration Statement on Form S-4/A filed by Phoenix Biotech Acquisition Corp. with the Securities and Exchange Commission on June 7, 2023).
10.2+
CERo Therapeutics Holdings, Inc. 2024 Equity Incentive Plan (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K/A filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on February 27, 2024).
10.3+
CERo Therapeutics Holdings, Inc. 2024 Employee Stock Purchase Plan (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K/A filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on February 27, 2024).
10.4
Form of Indemnification Agreement, by and between Phoenix Biotech Acquisition Corp. and each of its directors and executive officers (incorporated by reference to Exhibit 10.4 to the Registration Statement on Form S-4/A filed by Phoenix Biotech Acquisition Corp. with the Securities and Exchange Commission on December 18, 2023).
10.5
Investor Rights and Lock-Up Agreement, dated February 14, 2024, by and between Phoenix Biotech Acquisition Corp. and the parties named therein (incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K/A filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on February 27, 2024).
10.6
Amended and Restated Securities Purchase Agreement, dated as of February 14, 2024, by and between Phoenix Biotech Acquisition Corp., CERo Therapeutics, Inc. and the investors named therein (incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K/A filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on February 27, 2024).
10.7
Registration Rights Agreement, dated as of February 14, 2024, by and between Phoenix Biotech Acquisition Corp., CERo Therapeutics, Inc. and the investors named therein (incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K/A filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on February 27, 2024).
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10.8
Common Stock Purchase Agreement, dated as of February 14, 2024, by and between CERo Therapeutics Holdings, Inc. and Keystone Capital Partners, LLC (incorporated by reference to Exhibit 10.8 to the Current Report on Form 8-K/A filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on February 27, 2024).
10.9
Registration Rights Agreement, dated as of February 14, 2024, by and between CERo Therapeutics Holdings, Inc. and Keystone Capital Partners, LLC (incorporated by reference to Exhibit 10.9 to the Current Report on Form 8-K/A filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on February 27, 2024).
10.10
Form of Share Reallocation Agreement, dated as of February 14, 2024, by and among Phoenix Biotech Acquisition Corp., Phoenix Biotech Sponsor, LLC and the parties named therein (incorporated by reference to Exhibit 10.10 to the Current Report on Form 8-K/A filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on February 27, 2024).
10.11
Letter Agreement, dated as of February 14, 2024, by and between Phoenix Biotech Sponsor, LLC and Cero Therapeutics Holdings, Inc. (incorporated by reference to Exhibit 10.11 to the Current Report on Form 8-K/A filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on February 27, 2024).
10.12
Side Letter, dated as of February 14, 2024, by and between Phoenix Biotech Acquisition Corp. and Keystone Capital Partners, LLC (incorporated by reference to Exhibit 10.12 to the Current Report on Form 8-K/A filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on February 27, 2024).
10.13
Securities Purchase Agreement, dated as of March 29, 2024, by and between CERo Therapeutics Holdings, Inc. and the investors named therein (incorporated by reference to Exhibit 10.13 to the Annual Report on Form 10-K filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on April 2, 2024).
10.14
Registration Rights Agreement, dated as of March 29, 2024, by and between CERo Therapeutics Holdings, Inc. and the investors party thereto (incorporated by reference to Exhibit 10.14 to the Annual Report on Form 10-K filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on April 2, 2024).
10.15+
Consulting Agreement, dated September 30, 2024, by and between the Company and Kristen Pierce (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on October 2, 2024).
10.16+
Consulting Agreement, dated September 30, 2024, by and between the Company and Andrew Kucharchuk (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on October 2, 2024).
10.17+
Consulting Agreement, dated September 30, 2024, by and between the Company and Brian G. Atwood (incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on October 2, 2024).
10.18+
Consulting Agreement, dated September 30, 2024, by and between the Company and Chris Ehrlich (incorporated by reference to Exhibit 10.5) to the Current Report on Form 8-K filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on October 2, 2024).
10.19
Securities Purchase Agreement, dated as of September 25, 2024, by and between CERo Therapeutics Holdings, Inc. and the investors named therein (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on September 25, 2024).
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5
10.20
Registration Rights Agreement, dated as of September 26, 2024, by and between CERo Therapeutics Holdings, Inc. and the investors party thereto (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on September 25, 2024).
10.21
Consent and Waiver Agreement, dated as of September 26, 2024, by and between CERo Therapeutics Holdings, Inc. and the investors party thereto (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on September 25, 2024).
10.22
Common Stock Purchase Agreement, dated as of November 8, 2024, by and between CERo Therapeutics Holdings, Inc. and Keystone Capital Partners, LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on November 12, 2024).
10.23
Registration Rights Agreement, dated as of November 8, 2024, by and between CERo Therapeutics Holdings, Inc. and Keystone Capital Partners, LLC (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K/A filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on November 12, 2024).
10.24**
Form of Securities Purchase
    Agreement.
10.25**
Form of Placement Agency
    Agreement.
21.1
List of subsidiaries of CERo Therapeutics Holdings, Inc. (incorporated by reference to Exhibit 21.1 to the Annual Report on Form 10-K filed by CERo Therapeutics Holdings, Inc. with the Securities and Exchange Commission on April 2, 2024).
23.1*
Consent of Citrin Cooperman & Company LLP (with respect to the Phoenix Biotech Acquisition Corp. financial statements).
23.2*
Consent of Wolf & Company, P.C. (with respect to CERo Therapeutics, Inc. financial statements).
23.3**
Consent of Goodwin Procter
    LLP (included as part of Exhibit 5.1).
24.1*
Power of Attorney (included on signature page to this registration statement).
101.INS*
Inline XBRL Instance Document.
101.SCH*
Inline XBRL Taxonomy Extension
    Schema Document.
101.CAL*
Inline XBRL Taxonomy Extension
    Calculation Linkbase Document.
101.DEF*
Inline XBRL Taxonomy Extension
    Definition Linkbase Document.
101.LAB*
Inline XBRL Taxonomy Extension
    Labels Linkbase Document.
101.PRE*
Inline XBRL Taxonomy Extension
    Presentation Linkbase Document.
104**
Cover Page Interactive
    Data File (formatted as Inline XBRL and contained in Exhibit 101).
107**
Filing Fee Table.
*
Filed herewith.
**
To be filed by amendment.
+
Indicates management contract or compensatory plan.
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6
(b) Financial Statement Schedules.
See the index to the consolidated
financial statements included on page F-1 for a list of the financial statements included in this registration statement. Schedules not
listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
Item 17
.
Undertakings
The undersigned registrant
hereby undertakes:
1.
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i)
To include any prospectus required by section 10(a)(3) of the Securities Act;
(ii)
To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the "
Calculation of Registration Fee
" table in the effective registration statement.
(iii)
To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
2.
That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
3.
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
4.
That, for the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
5.
That, for the purpose of determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i)
Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii)
Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii)
The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv)
Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
Insofar as indemnification
for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant
to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of
the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
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7
SIGNATURES
Pursuant to the requirements
of the Securities Act of 1933, as amended, the registrant has duly caused this registration statement to be signed on its behalf by the
undersigned, duly authorized, in the city of South San Francisco, State of California, on the 20th day of December, 2024.
CERO THERAPEUTICS HOLDINGS, INC.
By:
/s/ Chris Ehrlich
Chris Ehrlich
Chairman, Chief Executive Officer and Director
(Principal Executive Officer)
By:
/s/ Andrew Kucharchuk
Andrew Kucharchuk
Chief Financial Officer
(Principal Financial and Accounting Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE
PRESENTS, that each person whose signature appears below constitutes and appoints each of Chris Ehrlich and Andrew Kucharchuk as his or
her true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him or her and in his or her name,
place and stead, in any and all capacities, to sign one or more registration statements on Form S-1 and any and all amendments to such
registration statements, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the United
States Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority
to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any
of them, or their or his or her substitutes or substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements
of the Securities Act of 1933, as amended, this registration statement has been signed below by the following person in the capacities
and on the dates indicated.
Signature
Title
Date
/s/ Chris Ehrlich
Chairman and Chief Executive Officer and Director
December 20, 2024
Chris Ehrlich
(Principal Executive Officer)
/s/ Andrew Kucharchuk
Chief Financial Officer
December 20, 2024
Andrew Kucharchuk
(Principal Financial and Accounting Officer)
/s/ Michael Byrnes
Director
December 20, 2024
Michael Byrnes
/s/ Kathleen LaPorte
Director
December 20, 2024
Kathleen LaPorte
/s/ Lindsey Rolfe
Director
December 20, 2024
Lindsey Rolfe
/s/ Shami Patel
Director
December 20, 2024
Shami Patel
/s/ Brian Atwood
Director
December 20, 2024
Brian Atwood
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