Company: PFSA
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001013762-25-004396
Chunk: 1177

Company: Profusa, Inc.
Filing Date: 2025-03-31
Form: 10-K
Item: Item 7A
Chunk 1177
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740 additionally requires a valuation allowance to be established
when it is more likely than not that all or a portion of deferred tax assets will not be realized. As of December 31, 2024 and 2023, the
Company’s deferred tax asset had a full valuation allowance recorded against it.

ASC 740 also clarifies the accounting for uncertainty
in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process
for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits
to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides
guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and transition.

The Company recognizes interest and penalties
related to unrecognized tax benefits as a formation cost expense. The Company is currently not aware of any issues under review that could
result in significant payments, accruals or material deviation from its position. Interest and penalties expense amounted to $0 and $19,158
during the years ended December 31, 2024 and 2023, respectively.

The Company has identified the United States as
its only “major” tax jurisdiction. The Company is subject to income taxation by major taxing authorities since inception.
These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and
compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax benefits
will materially change over the next twelve months.

Derivative Financial Instruments

The Company evaluates its financial instruments,
such as warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance
with ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are initially recorded at fair value on the grant date
and re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. Derivative
assets and liabilities are classified in the consolidated balance sheets as current or non-current based on whether or not net-cash settlement
or conversion of the instrument could be required within 12 months of the balance sheet date.

Convertible Promissory Note

The fair value of the Company’s convertible
promissory note is valued using a compound option formula on the convertible feature and a present value of the host contract. The valuation