Company: CERO
Filing Date: 2025-05-15
Form Type: 10-Q
Source: 0001213900-25-044335
Chunk: 14

Company: CERO THERAPEUTICS HOLDINGS, INC.
Filing Date: 2025-05-15
Form: 10-Q
Item: Item 1
Chunk 14
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 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 in
each of the three months periods ended March 31, 2025 and 2024, 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 condensed consolidated statement of operations as rent expense, within general and administrative expenses. The Company does not
have any financing leases as of March 31, 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