Company: CERO
Filing Date: 2025-08-22
Form Type: 424B3
Source: 0001213900-25-080017
Chunk: 22

Company: CERO THERAPEUTICS HOLDINGS, INC.
Filing Date: 2025-08-22
Form: 424B3
Chunk 22
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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 earnout liability of approximately $4.9 million on the merger date. The earnout liability is measured using unobservable (Level
3) inputs and is included in current liabilities on the accompanying consolidated balance sheet. The Company estimated the fair value
of the earnout liability by applying a Monte-Carlo simulation method using the Company’s projection of future operating results
and the estimated probability of achievement of the earnout target metrics. The Monte-Carlo simulation is a generally accepted
statistical technique used to generate a defined number of valuation paths in order to develop a reasonable estimate of the fair value
of the earnout liability. The liability is remeasured to fair value using the Monte-Carlo simulation method at each reporting period,
and the change in fair value is recognized in other income (expense) until the contingency is resolved. During the three months and six
month period ended June 30, 2024, the Company recorded a gain from change of fair value of the earnout liability of $2,900,000 and $4,700,000,
respectively, which is included in other income (expense), net on the accompanying unaudited condensed consolidated statement of operations.
During the three and six months ended June 30, 2025