Company: PFSA
Filing Date: 2025-11-19
Form Type: 10-Q
Source: 0001213900-25-112723
Chunk: 191

Company: Profusa, Inc.
Filing Date: 2025-11-19
Form: 10-Q
Item: Part I, Item 8
Chunk 191
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-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 conclusion date which is December 31, 2025 with changes in fair value recognized in earnings.

The earnouts that meet the criteria for equity classification—generally
those settled in a fixed number of shares and not requiring cash settlement—are recorded within additional paid-in capital at the
acquisition-date fair value and are not subsequently remeasured.

Warrants

The Company reviews the terms of warrants to purchase its common stock
to determine whether warrants should be classified as liabilities or stockholders’ deficit in its condensed consolidated balance
sheets. In order for a warrant to be classified in stockholders’ deficit, the warrant must be (i) indexed to the Company’s
equity and (ii) meet the conditions for equity classification.

If a warrant does not meet the conditions for stockholders’ deficit
classification, it is carried on the condensed consolidated balance sheets as a warrant liability measured at fair value, with subsequent
changes in the fair value of the warrant recorded in other non-operating losses (gains) in the condensed consolidated statements of operations.
If a warrant meets both conditions for equity classification, the warrant is initially recorded, at its relative fair value on the date
of issuance, in stockholders’ deficit in the condensed consolidated balance sheets, and the amount initially recorded is not subsequently
remeasured at fair value.

Gain on PPP Loan Forgiveness

On April 16, 2020 and May 25, 2021, we borrowed $1.2 million (the “PPP
Loan 1”) and $1.3 million (the “PPP Loan 2”), respectively, as a Paycheck Protection Program loan (together the “PPP
Loans”). The Paycheck Protection Program, established as part of