Company: PFSA
Filing Date: 2025-11-19
Form Type: 10-Q
Source: 0001213900-25-112723
Chunk: 175

Company: Profusa, Inc.
Filing Date: 2025-11-19
Form: 10-Q
Item: Part I, Item 8
Chunk 175
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 the fixed-for-fixed
condition (fixed number of shares for fixed price). These warrants were recorded at their fair value on grant date which was $0.9 million
and were expensed to financing fees in accordance with US GAAP accounting for standby equity purchase agreements (“SEPA”).

Issuance fees such as warrant costs associated to a SEPA or ELOC are
expensed upfront, as this arrangement is not considered indexed to the Company's stock under step 2 in ASC 815-40-15-7 and therefore is
liability classified. The associated equity classified warrants were not remeasured after initial issuance, and as of September 30, 2025,
these warrants were exercised and all 900,000 shares of Common Stock were issued.

When the Company draws on the ELOC and issues shares, it recognizes
the proceeds in equity. The amount recorded is based on the fair value of the shares issued or the cash received, whichever is more reliably
measurable.  The Company records the actual cash received for each draw, as this is clearly measurable and traceable.

29

Note 9 — Stock Option Plan

In 2010, Legacy Profusa adopted the 2010 Equity Incentive Plan (the
“Plan”) under which 2,000,000 shares of the Company’s Common Stock have been initially reserved for issuance to employees,
directors and consultants. The number of reserved shares that had been increased over the years equaled 4,636,454 shares at the time of
the Business Combination. The Company is currently drafting a new 2025 Equity Incentive Plan that will replace the 2010 Equity Incentive
Plan. All previously issued options under the 2010 Equity Incentive plan will be held under the new plan, with no additional impact to
the option holders. Options granted under the Plan may be either incentive stock options (“ISO”) or nonqualified stock options
(“NSO”). ISOs may be granted only to Company employees, including officers and directors who are also employees. NSOs may
be granted to Company employees, consultants and advisors.

Upon the Closing, all outstanding Legacy Profusa options converted
into options exercisable for shares of Company Common Stock with the same terms except for the number of shares exercisable and the exercise
price, each of which was adjusted using the Exchange Ratio of approximately $0.346. The mechanism of conversion resulted in the fair value
of each option prior to the Closing equal to the fair