Company: PFSA
Filing Date: 2025-03-31
Form Type: 10-K
Source: 0001013762-25-004396
Chunk: 1095

Company: Profusa, Inc.
Filing Date: 2025-03-31
Form: 10-K
Item: Item 7
Chunk 1095
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 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
technique requires inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s
own assumption about the assumptions a market participant would use in pricing the working capital loan.

F-13

Warrant
Liabilities

The
Company accounts for the 17,404,250 warrants issued in connection with the IPO (the 9,487,500 Public Warrants, the 7,347,500 Private
Placement Warrants, and the 569,250 Representative Warrants inclusive of the underwriters’ over-allotment option)
in accordance with the guidance contained in ASC 815-40. Such guidance provides that because the warrants do not meet the criteria for
equity treatment thereunder, each warrant must be recorded as a liability. Accordingly, the Company has classified each warrant as a
liability at its fair value. This liability is subject to re-measurement at each balance sheet date. With each such re-measurement,
the warrant liabilities will be adjusted to fair value, with the change in fair value recognized in the Company’s consolidated
statements of operations (See Note 8).

In
determining the fair value of the Private Placement Warrants and the Representative’s Warrants, assumptions related to expected
share-price volatility, expected life and risk-free interest rate are utilized. The Company estimates the volatility of its common stock
based on historical volatility that matches the expected remaining life