Company: CERO
Filing Date: 2025-11-19
Form Type: 10-Q
Source: 0001213900-25-112619
Chunk: 19

Company: CERO THERAPEUTICS HOLDINGS, INC.
Filing Date: 2025-11-19
Form: 10-Q
Item: Item 1
Chunk 19
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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 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