Company: PFSA
Filing Date: 2025-04-03
Form Type: CORRESP
Source: 0001213900-25-028546
Chunk: 5

Company: Profusa, Inc.
Filing Date: 2025-04-03
Form: CORRESP
Chunk 5
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 equity shares and a fixed monetary amount (the amount initially invested by the equity holders), and any adjustments to the settlement amounts do not violate the “fixed-for-fixed” principle.

All Milestone analysis: Under ASC 480-10-55-26, the Earnouts are not within the scope of ASC 480 as they do not embody an obligation. Thus, the Earnouts should be evaluated under ASC 815.

The next step of analysis should be based on ASC 815-10-15-83 to determine whether the Earnouts should be accounted for as derivative instruments:

| a. | Underlying, notional amount, payment provision. |

The Earnouts have an underlying amount representing the fair value of NorthView Common Stock for Milestone I Earnout and Milestone II Earnout and the Company’s revenue for Milestone III Earnout and Milestone Event IV earnout. The notional amount for the Earnouts is the number of shares issuable upon each trigger event.

| b. | Initial net investment. |

The Earnouts require little initial net investment. Milestone I Earnout and Milestone II Earnout is contingent upon achievement of share prices which are above the fair value of NorthView Common Stock on the date of the Merger. Milestone III Earnout and Milestone Event IV earnout are contingent upon achievement of certain revenue targets, while Profusa has no history of revenue. As such the fair values of the Earnouts are significantly less than the fair value of the underlying shares. Accordingly, holding position in the Earnouts require little to no initial investment.

| c. | Net settlement. |

The net settlement criterion in ASC 815-10-15-83(c) can be met in any one of three different ways:

1. Contractual net settlement,

2. Through a market mechanism, or

3. Through delivery of a derivative or instrument that is readily convertible to cash.

Shares issuable to each holder of the Earnouts are publicly traded. Therefore, the delivered asset (shares) is readily convertible to cash. As such the net settlement criterion is met.

Based on the above, the Earnouts meet the definition of a derivative.

Further, for the Milestone Event III earnout and Milestone Event IV earnout, the Company considered ASC 815-10-15-59(d) which states, “Contracts that are not exchange-traded are not subject to the requirements of this Subtopic if the underlying on which the settlement is based on any one of the following:

. . .

| d