Company: CERO
Filing Date: 2025-08-22
Form Type: 10-Q
Source: 0001213900-25-079898
Chunk: 62

Company: CERO THERAPEUTICS HOLDINGS, INC.
Filing Date: 2025-08-22
Form: 10-Q
Item: Item 1
Chunk 62
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million. The investment in Stella’s Series D Preferred Stock is classified as an equity security without a readily determinable
fair value and is accounted for under the measurement alternative in accordance with ASC 321, Investments – Equity Securities.
Under this method, the investment is initially recorded at cost, which was determined to be equal to the fair value of the consideration
received, and is subsequently adjusted for observable price changes in orderly transactions for the same or similar securities and for
impairment, if any. There was no impairment identified on the investment in equity securities during the period ended June 30, 2025.
This non-cash transaction did not impact the Company’s cash flows and is disclosed as a non-cash investing and financing activity
in the condensed consolidated statement of cash flows in accordance with ASC 230, Statement of Cash Flows. 

Earnout
and warrant liabilities

The
Company initially recorded the earnout liability at estimated fair value using a Monte Carlo analysis and has revalued the earnout liability
at each subsequent period. The Monte Carlo analysis used the following assumptions:

    February 14

    June 30, 2025  
    2024 to June 30, 2024

    (Successor)  
    (Successor)
  
    Starting share price 
    $14.60  
    $600.00 to $9,800.00
  
    Tranche 1 trigger price 
    $2,500.00  
    $2,500.00 to $6,400.00
  
    Tranche 2 trigger price 
    $3,000.00  
    $3,000.00 to $7,700.00
  
    Contractual term (in years) 
     2.65  
    3.60 to 4.00
  
    Volatility 
     100% 
    90%
  
    Risk-free interest rate 
     3.82% 
    4.20% to 4.33%

27

The classification of the fair value of the earnout liability and derivative
liabilities and the change in the fair value measurement using significant inputs (Level 3) for the six months ended June 30, 2025 (Successor),
for the period from January 1, 2024 through February 13, 2024 (Predecessor), and February 14, 2024 through December 31, 2024 for