Company: PFSA
Filing Date: 2025-05-13
Form Type: S-4/A
Source: 0001213900-25-042224
Chunk: 359

Company: Profusa, Inc.
Filing Date: 2025-05-13
Form: S-4/A
Chunk 359
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out Rights to the securityholders is not dependent on the securityholders’ employee or ex -employeestatus and, accordingly, these instruments are not considered to be compensatory in nature and are not 184 within the scope of ASC 718 Compensation — Stock Compensation. Further, because the Milestone Earnout Rights, Sponsor Inducement Recoupment Earnout Rights and Profusa Inducement Recoupment Earnout Rights are not considered mandatorily redeemable shares, do not embody and obligation to repurchase New Profusa shares nor are indexed to such obligation, and do not represent an obligation that might be settled by issuing a variable number of shares, these instruments do not represent a liability under ASC 480 Distinguishing Liabilities from Equity. The Milestone Earnout Rights, Sponsor Inducement Recoupment Earnout Rights and Profusa Inducement Recoupment Earnout Rights meet the definition of a derivative instrument (i.e. they contain an underlying, notional amount and payment provisions, they require initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors, and they contain net settlement provisions as they relate to publicly traded shares). However, the Milestone Earnout Rights, Sponsor Inducement Recoupment Earnout Rights and Profusa Inducement Recoupment Earnout Rights are considered to be indexed to the New Profusa’s own stock because: (a)they are contingently exercisable exclusively on the basis of the New Profusa’s own share price and/or by reference to the Company’s own operations (i.e. revenue targets); (b)their settlement amount is equal the difference between the fair value of a fixed number of the New Profusa’s equity shares and a fixed monetary amount (the amount initially invested by the equity holders), and any adjustments to the settlement amounts do not violate the “fixed -for-fixed” principle. The Company evaluated whether the Earnout milestones, and its considerations include whether the earnout milestones are within the scope of ASC 480 or ASC 815. Under ASC 480 -10-55-26, the Earnouts are not within the scope of ASC 480 as they do not embody an obligation. The Company has concluded that the Earnouts should be evaluated under ASC 815 and has analyzed the ASC 815 equity scope exceptions on the Earnouts. The Company originally concluded, in connection with the Merger agreement signed in November 2022, that Milestone I Earnout,