NOTE 14 – COMMITMENTS AND CONTINGENCIES

Legal matters

From time to time, the Company may be involved in litigation or receive claims arising out of our operations in the normal course of business. We are not currently a party to any other legal proceeding nor are we aware of claims that we believe would, if decided adversely, have a material adverse effect on the Company’s business, financial condition, or operating results.

Settlement Agreement with Former Legal Counsel

On September 30, 2026 (the “Effective Date”), the Company and its wholly owned subsidiary, CERo Therapeutics, Inc. (the “Operating Subsidiary”), entered into a Settlement and Release Agreement (the “Settlement Agreement”) with Goodwin Procter LLP (“Goodwin”), the Company’s former legal counsel, to resolve unpaid fees for legal services totaling approximately $3,650,000 (the “Outstanding Debt”), which were included in accounts payable in the condensed consolidated balance sheets.

Under the Settlement Agreement, the Company agreed to deliver the following consideration in full satisfaction of the Outstanding Debt: (i) a cash payment of $300,000, which the Company paid on September 30, 2026; (ii) a non-interest-bearing promissory note issued by the Operating Subsidiary in the principal amount of $500,000 (See Note 6); and (iii) following the closing of a contemplated strategic transaction involving the sale of all or substantially all of the equity interests of the Operating Subsidiary (the “Transaction”), an equity interest in a special purpose vehicle to be formed in connection with the Transaction, equal to 1% of a 20% management equity pool to be established within that vehicle (the “Equity Grant”). If the Transaction does not close, or the special purpose vehicle is not formed, on or before December 31, 2027, the obligation to issue the Equity Grant will be extinguished.

Goodwin agreed to forbear from collection actions on the Outstanding Debt while the Company complies with the Settlement Agreement, until the earlier of March 31, 2027 or the commencement of a liquidation, wind-up, or dissolution of the Operating Subsidiary or the special purpose vehicle. Goodwin’s release of the Company from claims relating to the Outstanding Debt becomes effective only upon receipt of the cash payment, issuance and repayment in full of the Note by March 31, 2027, and completion of the Equity Grant. If the Company fails to perform, the forbearance terminates and Goodwin may pursue all available remedies, including collection of the Outstanding Debt.

As of September 30, 2026, the remaining liability of $3,350,000 is included on the accompanying unaudited condensed consolidated balance sheet in accounts payable ($2,850,000) and notes payable ($500,000). The Company may recognize a gain on the restructuring, measured as the excess of the carrying amount of the liability over the consideration paid (including the fair value of the Equity Grant, if issued), when the release conditions are satisfied. The Settlement Agreement also includes a release by the Company and the Operating Subsidiary of claims against Goodwin, mutual non-disparagement and confidentiality provisions, and the Company’s acknowledgment of Goodwin’s withdrawal as counsel effective September 22, 2026.

The Company has not recognized a liability for the Equity Grant. The special purpose vehicle has not been formed and the Transaction has not closed, and accordingly the fair value of the Equity Grant was not reasonably estimable at September 30, 2026. The Company will measure and recognize the Equity Grant, and reassess the restructuring, in the period in which the Transaction closes and the vehicle is formed to date.

See Note 8 for leases.