Company: PFSA
Filing Date: 2025-06-13
Form Type: 10-Q
Source: 0001213900-25-054386
Chunk: 100

Company: Profusa, Inc.
Filing Date: 2025-06-13
Form: 10-Q
Item: Part I, Item 8
Chunk 100
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 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 contained in ASC 815-40. Such
guidance provides that because the warrants do not meet the criteria for equity treatment thereunder, each warrant must be recorded as
a liability. Accordingly, the Company has classified each warrant as a liability at its fair value. This liability is subject to re-measurement at
each balance sheet date. With each such re-measurement, the warrant liabilities will be adjusted to fair value, with the change in fair
value recognized in the Company’s condensed consolidated statements of operations (See Note 8).

In determining the fair value of the Private
Placement Warrants and the Representative’s Warrants, assumptions related to expected share-price volatility, expected life and
risk-free interest rate are utilized