Company: CERO
Filing Date: 2025-05-15
Form Type: 10-Q
Source: 0001213900-25-044335
Chunk: 34

Company: CERO THERAPEUTICS HOLDINGS, INC.
Filing Date: 2025-05-15
Form: 10-Q
Item: Item 1
Chunk 34
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 with the Series A Preferred Stock.

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

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

18

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