Company: PFSA
Filing Date: 2025-11-19
Form Type: 10-Q
Source: 0001213900-25-112723
Chunk: 66

Company: Profusa, Inc.
Filing Date: 2025-11-19
Form: 10-Q
Item: Part I, Item 1
Chunk 66
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 compensation, related to executive management, finance, legal, human
resource functions, and business development, contractor and professional services fees, audit and compliance expenses, insurance
costs and general corporate expenses, including allocated facility-related expenses and information technology costs.

Loss on Change in the Fair Value of Tasly Convertible Debt

We elected to apply fair value option to account for the convertible
loans issued between June 2023 and March 2024 (the “Tasly Convertible Debt”), under which none of the embedded conversion or
redemption features were bifurcated and separately accounted for. Rather, the Tasly Convertible Debt in its entirety was recorded at fair
value at inception and is subject to remeasurement to fair value at each balance sheet date, with the change in fair value reflected in
the statements of operations and comprehensive loss.

Fair Value of Financial Instruments

The Company’s financial instruments consist of other receivables, accounts
payable, warrant liabilities, earnout, promissory notes, convertible promissory notes and senior notes. The Company states accounts payable
at their carrying value, which approximates fair value due to the short time to the expected receipt or payment. The promissory notes
are stated at amortized cost, which approximates their fair value, because the Company believes their terms approximate those that would
be available to it on a similar loan from an unrelated party.

40

Earnout Arrangements

In connection with the Business Combination, the Company entered into
earnout arrangements that provide for the issuance of additional shares of the Company’s Common Stock (or cash payments, if applicable)
to certain pre-Business Combination holders upon the achievement of specified post-closing share-price or operational milestones.

The Company evaluates earnout arrangements in a de-SPAC transaction
in accordance with ASC 805, Business Combinations, and the classification guidance under ASC 480, Distinguishing Liabilities
from Equity, and ASC 815, Derivatives and Hedging. Earnouts that are contingent on future market-based or performance-based
conditions and each milestone is legally detachable and separate. Milestones I, II, and IV are equity classified contingent consideration
which were fair-valued as of the Close Date at $1.7 million and will not be subsequently remeasured. Milestone III was determined to be
liability-classified contingent consideration with no value associated due to a lack of probability. This was continue to be revalued
through the Milestone III