Company: CERO
Filing Date: 2025-08-22
Form Type: 10-Q
Source: 0001213900-25-079898
Chunk: 18

Company: CERO THERAPEUTICS HOLDINGS, INC.
Filing Date: 2025-08-22
Form: 10-Q
Item: Item 1
Chunk 18
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) 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, the Company did not record a gain or loss from change of fair value of the earnout
liability.

8

Fair
value measurements – The Company’s assets and liabilities are carried at fair value. Fair value is the amount that would
be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement
date. In determining fair value, the assumptions that market participants would use in pricing an asset or liability (the inputs) are
based on a tiered fair value hierarchy consisting of three levels, as follows:

    Level 1
    – 
    Observable
    inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

    Level 2
    – 
    Inputs
    (other than quoted prices included in Level 1) that are either directly or indirectly observable for the asset or liability.
    These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets
    or liabilities in markets that are not active.

    Level 3
    – 
    Unobservable
    inputs for which there is little or no market data and which require the Company to develop its own assumptions about how market
    participants would price the asset or liability. Consideration is given to the risk inherent in the valuation technique and the risk
    inherent in the inputs to the model.

Carrying
amounts of certain of the Company’s financial instruments, including cash, restricted cash, and cash equivalents, prepaid
expenses and other current assets, accounts payable, and accrued liabilities approximate fair value due to their relatively short
maturities.

Non-financial
assets such as property and equipment and operating lease right-of-use assets are evaluated for impairment and adjusted to fair value
using Level 3 inputs only when impairment is recognized. Fair values are considered Level 3 when management makes significant
assumptions in developing a discounted cash flow model based upon a number of considerations including projections of revenues, earnings,
and a discount rate. To date