Cero Therapeutics Holdings, Inc. Announces Issuance of Convertible Promissory Note Worth Up to \$1 Million

Cero Therapeutics Holdings, Inc. (NASDAQ: CERO), a South San Francisco-based biotechnology company, has disclosed in a recent Form 8-K filing that it has entered into a significant financing agreement that could have notable implications for current and prospective shareholders.

Key Details of the Financing Agreement

• Instrument: Convertible Promissory Note (the “Note”)
• Maximum Borrowing Amount: Up to \$1,000,000
• Interest Rate: 10% per annum
• Maturity Date: August 6, 2027
• Conversion Feature: The Note is convertible into shares of Cero’s common stock (par value \$0.0001 per share) at the option of the lender.
• Conversion Price: The lower of (i) \$0.05 per share and (ii) 80% of the average of the 5 lowest intraday trading prices during the 20 days prior to the conversion request, subject to certain adjustments and a beneficial ownership limitation of 4.99%.

Implications for Shareholders

• Potential Dilution: If the lender exercises its conversion rights, there could be significant dilution for existing shareholders, especially if the company’s share price falls below \$0.05. The conversion price can be as low as 80% of the lowest trading prices, which could result in more shares being issued for the same debt amount.
• Resale Registration: Cero is required to file a registration statement (Form S-1 or S-3) with the SEC to cover the resale of all shares issuable upon conversion of the Note. This means additional shares could enter the market, potentially affecting the stock price.
• Exemption from Registration: The Note was issued under Section 4(a)(2) and Rule 506(b) of the Securities Act as a private placement to an accredited investor, and the shares issuable upon conversion will also be issued under an exemption from registration.
• Beneficial Ownership Limitation: The conversion is subject to a cap so that the lender cannot own more than 4.99% of the company’s outstanding shares at any time, which serves to prevent immediate, excessive dilution.
• Use of Proceeds and Financial Flexibility: The ability to borrow up to \$1 million provides Cero with additional working capital and financial flexibility, which could support ongoing clinical or operational activities.

Board and Management

• Signatory: The report was signed by Chris Ehrlich, likely a member of the company’s executive team, on March 11, 2026.

Price Sensitivity and Shareholder Considerations

• This convertible note financing introduces the potential for near-term dilution and increased share supply, which may exert downward pressure on Cero’s share price if and when conversions occur.
• Conversely, the cash infusion may provide runway for operations or growth initiatives, which could be positive if managed effectively.
• Investors should closely monitor the company’s SEC filings for further details on the use of proceeds, conversion activity, and registration statement effectiveness.

Other Regulatory Disclosures

• No written communications, soliciting material, or pre-commencement tender offers were made in connection with this filing.
• Cero is classified as an “emerging growth company” and has not elected to use the extended transition period for complying with new or revised accounting standards.

Conclusion

The issuance of a convertible note with a variable conversion price could lead to substantial dilution for common shareholders if the share price declines. While the financing provides Cero with important capital, it also introduces risks related to share dilution, potential downward pressure on share price, and increased volatility as new shares could be registered and sold into the market. Shareholders and prospective investors should weigh these factors when evaluating their investment in Cero Therapeutics Holdings, Inc.

Disclaimer: This article is for informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. Investors are encouraged to review the company’s official filings and consult with a financial advisor before making investment decisions.

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