Company: PFSA
Filing Date: 2025-11-19
Form Type: 10-Q
Source: 0001213900-25-112723
Chunk: 203

Company: Profusa, Inc.
Filing Date: 2025-11-19
Form: 10-Q
Item: Part I, Item 8
Chunk 203
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 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, and material impact on reported results.

Valuation policies are reviewed quarterly, and inputs are updated based
on evolving market conditions and contractual developments. A change in the discount rate of +100 basis points would result in a fair
value change of approximately $17 thousand or (0.01)%, while a 10% change in volatility would impact fair value by approximately $152
thousand or 1.1%.

The Company classifies this instrument within Level 3 of the fair value
hierarchy and provides a reconciliation of beginning and ending balances in Note 4.

Recent Accounting Pronouncements

See the section titled “Recent Accounting Pronouncements”
in Note 2 of the notes to our unaudited condensed consolidated financial statements included in this Report for more information.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the
Exchange Act and are not required to provide the information otherwise required under this item.

Item 4. Controls and Procedures Evaluation of Disclosure Controls
and Procedures

Disclosure controls are procedures that are designed with the objective
of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Report, is recorded, processed,
summarized, and reported within the time period specified in the SEC’s rules and forms. Disclosure controls are also designed with the
objective of ensuring that such information is accumulated and communicated to our management, including the chief executive officer and
chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

48

We have performed a formal evaluation of our internal control over
financial reporting under the supervision and with the participation of management, including our principal executive officer