Company: PFSA
Filing Date: 2025-04-03
Form Type: CORRESP
Source: 0001213900-25-028546
Chunk: 6

Company: Profusa, Inc.
Filing Date: 2025-04-03
Form: CORRESP
Chunk 6
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) | Specified volumes of sales or service revenues of one of 
 the parties to the contract”                             |

Milestone Event III earnout and Milestone Event IV earnout meet the scope exception above from derivative accounting since payments under these milestones are based on revenue amounts. Accordingly, Milestone Event III earnout and Milestone Event IV earnout will not be accounted for as derivatives under ASC 815. However, while Milestone III Earnout and Milestone Event IV earnout are outside the scope of the derivatives guidance of ASC 815, they will be settled in the Company’s own stock. Accordingly, they must further be analyzed under the further guidance of ASC 815-40, which is applicable to any freestanding financial instrument that is potentially settled in an entity’s own stock, regardless of whether the instrument has all the characteristics of a derivative instrument.

Next, the Company considered the Section: “own equity” scope exception of PwC SPAC Guide which states, in part (emphasis added): Earnout provisions that result in financial instruments that are classified as liabilities are recognized at fair value with changes in fair value reflected in earnings. However, if the financial instrument meets the “own equity” scope exception in ASC 815-10-15-74(a), the financial instrument would be classified as equity with no subsequent remeasurement (unless the earnout is modified). It is important to note that the guidance in ASC 815-40 must be applied even if the instrument does not meet the definition of a derivative.

As such, the Company evaluated whether the Earnouts meet the equity scope exception under ASC 815.

| V. | ASC 815 – Equity Scope Exception |

The Earnouts will be accounted for as equity instruments (initially measured at fair value with no subsequent remeasurement) if they are indexed to NorthView Common Stock and are classified in equity. Under ASC 815-40-15-7, an instrument is considered indexed to the issuer’s equity if both:

Step 1: It is not contingently exercisable based on observable market other than the market of the issuer’s shares or observable index other than an index calculated or measured solely by reference to the issuer’s own operations, and

Step 2: Settlement amount equals the difference between (a) the fair value of a fixed number of the entity’s equity shares and (b) fixed monetary amount or a fixed amount of a debt instrument issued by the entity.

Management’s Evaluation of Contingent Exercise Provisions: For Milestone I Earnout