Company: CERO
Filing Date: 2025-11-20
Form Type: 424B3
Source: 0001213900-25-113118
Chunk: 24

Company: CERO THERAPEUTICS HOLDINGS, INC.
Filing Date: 2025-11-20
Form: 424B3
Chunk 24
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 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 consolidated 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 September 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
condensed 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 ended September 30, 2024 and for the period from February 14, 2024 to September
30, 2024, the Company recorded a gain from the change in fair value of the earnout liability of $170,000 and $4,870,000, respectively,
which is included in other income (expense), net on the accompanying unaudited condensed consolidated statement of operations. During
the three and nine months ended September 30, 2025, the Company did not record a gain or loss from the change in fair value of the earnout
liability.

Fair value measurements
– The Company’s assets and liabilities are carried at fair value. Fair value is the amount that