Company: PFSA
Filing Date: 2025-11-19
Form Type: 10-Q
Source: 0001213900-25-112723
Chunk: 78

Company: Profusa, Inc.
Filing Date: 2025-11-19
Form: 10-Q
Item: Part I, Item 1
Chunk 78
---
 (1) the accounting
estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (2)
changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could
have used in the current period, would have a material impact on our financial condition or results of operations.

47

Management has discussed several significant accounting estimates and
believes that the fair value of the related party Ascent PIPE Convertible note is the only accounting estimate that rises to the level
of a critical accounting estimate.

The related party convertible loan is carried at fair value based on
unobservable market inputs. The fair value of financial instrument is determined using various valuation techniques, including the market
approach. Where observable market prices are not available, we use models that incorporate assumptions about credit risk, interest rates,
and market volatility. These estimates require significant judgment, particularly for instruments classified as Level 3 in the fair value
hierarchy. Changes in these assumptions could materially affect the reported fair values and related income or expense. We regularly review
and update our valuation to reflect current market conditions and ensure consistency with accounting standards.

Management considered various fair value instruments; however, only
the Ascent PIPE convertible note is both classified as a Level 3 fair value instrument and is considered very material, and individually
over $5.0 million. The Ascent PIPE convertible loan was valued at $14.4 million as of September 30, 2025, and is a new loan that was issued
on the Closing Date. As such, we have one critical accounting estimates to report, and have included our considerations below.

Ascent PIPE Convertible Related Party Loan

The Company has elected to account for its convertible loan from a
related party at fair value under ASC 825, “Financial Instruments.” The loan is classified as a Level 3 financial instrument
due to the absence of observable market inputs and the significant use of management judgment in determining fair value.

The fair value is estimated using a probability-weighted discounted
cash flow model that incorporates multiple scenarios, including conversion, repayment, and extension. Key inputs include the discount
rate, expected term, volatility, and conversion likelihood. Because the loan is with a related party, observable market data is limited,
and management applies significant judgment in assessing the economic substance of the arrangement.

Changes in fair value are recognized in earnings each period. The Company
considers this estimate critical due to its complexity, subjectivity