Company: PFSA
Filing Date: 2025-06-13
Form Type: 10-Q
Source: 0001213900-25-054386
Chunk: 22

Company: Profusa, Inc.
Filing Date: 2025-06-13
Form: 10-Q
Item: Part I, Item 1
Chunk 22
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, accruals or material deviation from its position. There were no interest and penalty expenses incurred
during the three months ended March 31, 2025 and 2024.

The Company has identified the United States
as its only “major” tax jurisdiction. The Company is subject to income taxation by major taxing authorities since inception.
These examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and
compliance with federal and state tax laws. The Company’s management does not expect that the total amount of unrecognized tax
benefits will materially change over the next twelve months.

Derivative Financial Instruments

The Company evaluates its financial instruments,
such as warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance
with ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are initially recorded at fair value on the grant date
and re-valued at each reporting date, with changes in the fair value reported in the condensed consolidated statements of operations.
Derivative assets and liabilities are classified in the condensed consolidated balance sheets as current or non-current based on
whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet
date.

Convertible Promissory Note

The fair value of the Company’s convertible
promissory note is valued using a compound option formula on the convertible feature and a present value of the host contract. The valuation
technique requires inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s
own assumption about the assumptions a market participant would use in pricing the working capital loan.

Securities Purchase Agreement

The fair value of the Company’s securities purchase agreement
is valued using Monte Carlo models on the convertible feature and a present value of the host contract. The valuation technique requires
inputs that are both unobservable and significant to the overall fair value measurement. The instrument is subject to re-measurement at
each balance sheet date, with changes in fair value recognized in the condensed consolidated statements of operations.

Warrant Liabilities

The Company accounts for the 17,404,250 warrants
issued in connection with the IPO (the 9,487,500 Public Warrants, the 7,347,500 Private Placement Warrants, and the 569,250 Representative
Warrants inclusive of the underwriters’ over-allotment option) in accordance with the guidance