Company: CERO
Filing Date: 2025-08-22
Form Type: 424B3
Source: 0001213900-25-080011
Chunk: 90

Company: CERO THERAPEUTICS HOLDINGS, INC.
Filing Date: 2025-08-22
Form: 424B3
Chunk 90
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 identifies an observable price
change in an orderly transaction for an identical or similar investment of the same issuer, the Company measures the equity security at
fair value as of the date that the observable transaction occurred. Any adjustments resulting from observable price changes are recognized
in earnings. The Company monitors these investments for changes in observable prices from orderly transactions and assesses them for impairment.
If an equity security is deemed to be impaired, an impairment loss is recognized in earnings, measured as the difference between the investment’s
cost and its fair value at the impairment assessment date.

Earnout liability -As a result of the Merger in February 2024, the Company recognized an earnout liability of $4.9 million on the merger date. The earnout liability is measured using unobservable (Level 3) inputs and was included in current liabilities on 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 and six months 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, which is included in other income (expenses), net on the accompanying consolidated statement of operations, respectively.

Stock-based compensation– The Company periodically issues common stock and stock options to officers, directors, and consultants for services rendered. Stock-based compensation accounting requires the recognition of stock-based compensation expense, using a grant date fair value-based method, for costs related to all share-based payments including stock options and restricted stock awards granted to employees and non-employees. Companies are required to estimate the fair value of all share-based payment awards on the date of grant using an option pricing model, and the Company uses a Black-Scholes option pricing model (“Black-Scholes”) to estimate option award fair value. The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. The fair value of restricted stock awards is