Company: CERO
Filing Date: 2025-04-15
Form Type: 10-K
Source: 0001213900-25-032134
Chunk: 2678

Company: CERO THERAPEUTICS HOLDINGS, INC.
Filing Date: 2025-04-15
Form: 10-K
Item: Item 7
Chunk 2678
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 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, 2024 or 2023 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, 2024 or 2023.

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.

Convertible preferred stock – The
Predecessor’s convertible preferred stock was 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 were not solely within the control of the Company. As a result,
the shares of the Predecessor’s convertible preferred stock were considered contingently redeemable. The Company had elected to
present it’s the Predecessor’s convertible preferred stock as mezzanine equity in its balance sheet. Further, the Company
elected not to adjust the carrying values of the Predecessor’s convertible preferred stock to the redemption value of such shares,
since it was uncertain whether or when a redemption event would occur. Subsequent adjustments to increase the carrying values to the redemption
values were to be made when it became probable that such redemption would occur. The Company has not