Company: PFSA
Filing Date: 2025-08-14
Form Type: 10-Q
Source: 0001213900-25-076861
Chunk: 112

Company: Profusa, Inc.
Filing Date: 2025-08-14
Form: 10-Q
Item: Part I, Item 8
Chunk 112
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 to be taken in a tax
return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.
ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim period, disclosure and
transition.

The Company recognizes interest and penalties
related to unrecognized tax benefits as a formation cost expense. The Company is currently not aware of any issues under review that
could result in significant payments, accruals or material deviation from its position. The Company incurred $340 and no amount of interest
and penalty expenses during the three and six months ended June 30, 2025 and 2024, respectively.

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