Company: PFSA
Filing Date: 2025-11-19
Form Type: 10-Q
Source: 0001213900-25-112723
Chunk: 190

Company: Profusa, Inc.
Filing Date: 2025-11-19
Form: 10-Q
Item: Part I, Item 8
Chunk 190
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 agencies.
Fixed fee grants are awarded for specific research and development programs undertaken by us. Under these grants we receive milestone
payments from the government agencies upon our submission and approval by the government of agreed upon deliverables, consisting primarily
of the documented results of the specific research and development programs.

Research and Development Expenses

Research and development expenses consist primarily of personnel expenses,
including salaries, benefits, and stock-based compensation, costs of consulting, supplies, depreciation and amortization and allocations
of facility- related expenses. We expect our research and development expenses to increase as we increase staffing to support product
development, continue our clinical trials, build prototypes, and continue to explore and develop next generation technologies.

General and Administrative Expenses

General and administrative expenses consist of personnel
expenses, including salaries, benefits, and stock-based compensation, related to executive management, finance, legal, human
resource functions, and business development, contractor and professional services fees, audit and compliance expenses, insurance
costs and general corporate expenses, including allocated facility-related expenses and information technology costs.

Loss on Change in the Fair Value of Tasly Convertible Debt

We elected to apply fair value option to account for the convertible
loans issued between June 2023 and March 2024 (the “Tasly Convertible Debt”), under which none of the embedded conversion or
redemption features were bifurcated and separately accounted for. Rather, the Tasly Convertible Debt in its entirety was recorded at fair
value at inception and is subject to remeasurement to fair value at each balance sheet date, with the change in fair value reflected in
the statements of operations and comprehensive loss.

Fair Value of Financial Instruments

The Company’s financial instruments consist of other receivables, accounts
payable, warrant liabilities, earnout, promissory notes, convertible promissory notes and senior notes. The Company states accounts payable
at their carrying value, which approximates fair value due to the short time to the expected receipt or payment. The promissory notes
are stated at amortized cost, which approximates their fair value, because the Company believes their terms approximate those that would
be available to it on a similar loan from an unrelated party.

40

Earnout Arrangements

In connection with the Business Combination, the Company entered into
earnout arrangements that provide for the issuance of additional shares of the Company’s Common Stock (or cash payments, if applicable)
to certain pre-Business Combination holders upon the achievement of specified post-closing share