Company: CERO
Filing Date: 2025-11-19
Form Type: 10-Q
Source: 0001213900-25-112619
Chunk: 170

Company: CERO THERAPEUTICS HOLDINGS, INC.
Filing Date: 2025-11-19
Form: 10-Q
Item: Item 8
Chunk 170
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 PBAX retained the obligation to absorb the losses and/or receive the benefits of Predecessor that could have potentially
been significant to Predecessor. The Merger was accounted for as an asset acquisition as substantially all of the fair value was concentrated
in IPR&D, an intangible asset. Predecessor’s assets (except for cash) and liabilities were measured at fair value as of the
transaction date. Consistent with authoritative guidance on the consolidation of a VIE that is not considered a business, differences
in the total purchase price and fair value of assets and liabilities are recorded as a gain or loss to the consolidated statement of operations.
The loss reflected below on the consolidation of the VIE is reflected “on the line” (defined below) in the Company’s
opening accumulated deficit.

Costs incurred in obtaining
technology licenses are charged to research and development expense as IPR&D if the technology licensed has not reached technological
feasibility and has no alternative future use. The IPR&D recorded at the Closing of $45.6 million is reflected “on the line”
in the Company’s opening accumulated deficit. To estimate the value of the acquired IPR&D, the Company used the avoided cost
method, which calculates a present value of a 45% return on research and development effort applied to research and development expenditures
over the life of the Predecessor. The determination of the fair value requires management to make a significant estimate of the return
on research and development expenditures. Changes in these assumptions could have a significant impact on the fair value of the IPR&D.
The estimate of the return on research and development expenditures was based on multiple published studies analyzing actual returns of
research and development expenditures.

11

The following is a summary
of the purchase price calculation:

    Number of shares of Common Stock 
     2,500 
  
    Multiplied by PBAX’s share price, as of the Closing 
    $11,700.00 
  
    Total 
    $29,250,000 
  
    Fair value of PBAX founder’s shares converted to shares of Common Stock and transferred to Predecessor stockholders 
    $5,118,750 
  
    Fair value of contingent Common Stock consideration 
    $12,870,000 
  
    Total Common Stock consideration 
    $47,238,750 
  
    Assumed liabilities 
     3,311,153 
  
    Total purchase price 
    $50,549,903 

The allocation of the purchase