Company: CERO
Filing Date: 2025-04-15
Form Type: 10-K
Source: 0001213900-25-032134
Chunk: 2306

Company: CERO THERAPEUTICS HOLDINGS, INC.
Filing Date: 2025-04-15
Form: 10-K
Item: Item 4
Chunk 2306
---
 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 year ended
December 31, 2024, the Company recorded a gain from change of fair value of the earnout liability of $4,880,000, which is included in
other income, net on the accompanying consolidated statement of operations.

108

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 based upon the estimated share price
of the common shares on the date of grant. Forfeitures are accounted for as they occur, and the Company applies the simplified method
to estimate expected term of “plain vanilla” options. All options and restricted stock awards granted since inception are
expensed on a straight-line basis over the requisite service period, which is usually the vesting period, or upon the completion of certain
performance-based vesting terms and the related amounts are recognized in the statements of operations.

The accounting for stock
options granted to outside consultants is consistent with the accounting for stock-based payments to officers and directors, as described
above, by measuring the cost of services received in exchange for equity awards utilizing the grant date fair value of the awards, with
the cost recognized as stock-based compensation expense on the straight-line basis in the Company’s financial statements over the
vesting period of the awards.

Recent Accounting Standards

See the section titled