Company: CERO
Filing Date: 2025-08-22
Form Type: 10-Q
Source: 0001213900-25-079898
Chunk: 144

Company: CERO THERAPEUTICS HOLDINGS, INC.
Filing Date: 2025-08-22
Form: 10-Q
Item: Item 8
Chunk 144
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of the Company’s leases include variable lease costs to reimburse the lessor for real estate tax and insurance expenses, and certain
non-lease components that transfer a distinct service to the Company, such as common area maintenance services. The Company has elected
to separate the accounting for fixed lease components and variable and non-lease components for real estate and equipment leases. The
variable lease costs are recorded on the condensed consolidated statement of operations as rent expense, within general and administrative
expenses. The Company does not have any financing leases as of June 30, 2025 or December 31, 2024.

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

Preferred
stock warrant liability – Warrant accounting requires liability classification of warrants when the warrants include a conditional
obligation, once the warrant is exercised, that would require the Company to redeem its equity shares. Warrants are analyzed to determine
whether the warrant is a freestanding instrument and if so, whether the warrant was issued in a transaction with other instrument(s).
If a freestanding warrant is issued with other instruments in a single transaction, then the proceeds of the transaction are allocated
first to the fair value of the warrant, with the remainder being allocated to the other instruments. Any warrants considered a liability
are remeasured as of each reporting period end, with any changes in fair value recognized as interest and other income, net in the statement
of operations. The Company has determined any warrant liability is a Level 3 instrument in the fair value measurements hierarchy.
The Company has not included the effect of preferred stock warrants in the calculation of diluted loss per share since the inclusion
of such warrants would be anti-dilutive. As of June 30, 2025 and December 31, 2024, there was no preferred stock warrant liability,

Earnout
liability - As a result of the Merger in February 2024, the Company recognized
an initial