Company: CERO
Filing Date: 2025-04-15
Form Type: 10-K
Source: 0001213900-25-032134
Chunk: 705

Company: CERO THERAPEUTICS HOLDINGS, INC.
Filing Date: 2025-04-15
Form: 10-K
Item: Item 9A
Chunk 705
---
 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.

The following is a summary
of the purchase price calculation:

    Number of shares of Common Stock 
     50,000 
  
    Multiplied by PBAX’s share price, as of the Closing 
    $585.00 
  
    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 price was as follows:

    Cash 
    $963,855 
  
    Net working capital deficit (excluding cash and cash equivalents) 
     (1,819,514)
  
    Fixed assets 
     929,346 
  
    Acquired in-process research and development 
     45,640,000 
  
    Net assets acquired 
     45,713,687 
  
    Loss on consolidation of VIE 
     4,836,216 
  
    Total purchase