Company: PFSA
Filing Date: 2025-11-19
Form Type: 10-Q
Source: 0001213900-25-112723
Chunk: 146

Company: Profusa, Inc.
Filing Date: 2025-11-19
Form: 10-Q
Item: Part I, Item 8
Chunk 146
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 there is no obligation to net cash settle, there is a fixed quantity of shares, settlement
is exclusively made in shares, and there are no downside protections or leverage features that protect the holder from a decline in price.
As these conditions were all met, the earnout is considered both indexed to the entity’s own stock (or within the scope exception),
and meet the equity classification requirements. These earnouts were fair valued on the Closing Date and will not be remeasured. Similarly,
Milestone III was fair valued on the Closing Date and was determined to have a $0 value due to the current probability input of the event
occurring being 0%. Additionally, this Milestone III was revalued as of September 30, 2025 and continues to have a current probability
of 0% and no value was associated with the milestone. On the Closing Date, Milestones I and II had a value of $1.7 million, while Milestone
IV had a value of $0 as this was also deemed improbable of occurring. Milestone III does not meet the indexed guidance as it is based
on an event occurring to achieve $6 million in, which is not a market data or input. The Milestone IV Earnout does meet the scope exception
ASC 815-10-15-59(d) from derivative accounting since payments under these milestones are based on revenue amounts.

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. Legal costs incurred in connection with the issuance of equity-classified
warrants are capitalized as a reduction to Additional Paid-In Capital if the warrants are issued in conjunction with an equity financing
or equity-linked arrangement, and expensed immediately only if the costs are not directly attributable to the issuance.

12

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