8-K: Profusa Amends Convertible Note Terms, Restructures $22M Funding

Profusa, Inc. has amended its Securities Purchase Agreement and Senior Secured Convertible Promissory Note, restructuring its financing into four tranches totaling over $22 million and modifying conversion price terms.

Summary

• Profusa, Inc. (the "Company") amended its Securities Purchase Agreement and Senior Secured Convertible Promissory Note with Ascent Partners Fund LLC (the "Investor").
• The financing structure was revised from prior "Additional Closings" to four distinct tranches of senior secured convertible promissory notes.
• The First Tranche, for an aggregate principal amount of $10,000,000, already closed on July 11, 2025.
• A Second Tranche of $2,222,222 principal amount (purchase price $2,000,000) is subject to filing an S-1 registration statement and no Nasdaq listing deficiency.
• A Third Tranche of $5,555,556 principal amount (purchase price $5,000,000) requires full conversion or repayment of the First Tranche, an effective registration statement, no Nasdaq listing deficiency, and stockholder approval.
• A Fourth Tranche of $4,444,444 principal amount (purchase price $4,000,000) is contingent on full repayment of the First and Second Tranches, at least 50% repayment or conversion of the Third Tranche, an effective registration statement, and no Nasdaq listing deficiency.
• The conversion price provisions of the notes were amended to be the lower of the original conversion price or 95% of the lowest daily volume-weighted average price (VWAP) over the ten trading days preceding conversion.
• A "Floor Price" was introduced, setting the minimum conversion price at 20% of the common stock's closing sale price on August 22, 2025.
• The Company is required to file a definitive proxy statement for stockholder approval by September 5, 2025.

Sentiment

Score: 5

Explanation: The filing provides a mixed outlook. While it secures potential future funding tranches, which is positive for liquidity, the terms of the convertible notes, particularly the floating conversion price and the low floor price, introduce significant potential for shareholder dilution. The reliance on future conditions and stockholder approval for subsequent tranches also adds uncertainty. The high interest rate and default rate reflect a higher risk profile. Overall, it's a necessary but potentially costly financing arrangement.

Positives

• Secures potential access to additional capital tranches totaling $11,222,222 ($2M + $5M + $4M purchase price) beyond the initial $10,000,000 already received.
• The structured tranches provide a clear pathway for future funding, contingent on specific milestones and market conditions.
• The amendment clarifies the terms for future capital raises and conversion mechanics.

Negatives

• The revised conversion price, allowing conversion at 95% of the lowest 10-day VWAP, could lead to significant shareholder dilution if the stock price declines.
• Future tranches are subject to multiple conditions, including regulatory filings (S-1), Nasdaq compliance, and stockholder approval, which introduce execution risk.
• The introduction of a "Floor Price" at 20% of the August 22, 2025 closing price, while providing a floor, still allows for substantial dilution from current levels if the stock price drops significantly.
• Mandatory prepayment clauses for subsequent offerings could limit the Company's flexibility in future capital raises.
• The company is subject to a 10% per annum interest rate on the notes, increasing to 24% upon an Event of Default.

Risks

• **Dilution Risk**: The Alternate Conversion Price mechanism (95% of lowest 10-day VWAP) and the Floor Price (20% of August 22, 2025 closing price) could result in substantial dilution for existing shareholders if the stock price falls.
• **Execution Risk for Future Tranches**: The Second, Third, and Fourth Tranches are contingent on various conditions, including SEC registration statement effectiveness, maintaining Nasdaq listing compliance (no deficiency notices), and obtaining stockholder approval, which may not be met.
• **Nasdaq Listing Deficiency**: Failure to maintain Nasdaq listing compliance is a condition for accessing future tranches and an Event of Default.
• **Stockholder Approval Risk**: The Third Tranche requires stockholder approval, which the Company must seek by filing a proxy statement by September 5, 2025. Failure to obtain this approval could jeopardize the tranche.
• **Liquidity Risk**: The Company's ability to access future tranches is crucial for its financing, and failure to meet conditions could lead to liquidity challenges.
• **Default Risk**: Various events, including payment defaults, failure to comply with covenants, breaches of other indebtedness, or insolvency, could trigger an Event of Default, leading to immediate acceleration of all outstanding obligations and a 24% default interest rate.
• **Regulatory Compliance Risk**: Failure to timely file SEC reports or meet Rule 144 public information requirements could be an Event of Default.
• **Sanctions Law Compliance**: The Company covenants against violations of Sanctions Law or dealing with Sanctioned Persons, with non-compliance being an Event of Default.

Future Outlook

The Company anticipates filing a definitive proxy statement by September 5, 2025, to seek stockholder approval for the transactions, which is a condition for accessing the Third Tranche of financing. Future tranches are contingent on maintaining Nasdaq listing compliance and the effectiveness of registration statements covering conversion shares.

Industry Context

This financing amendment reflects a common strategy for early-stage or growth companies to secure capital through convertible debt, often with terms designed to attract institutional investors while managing immediate cash outflow. The tiered funding structure, contingent on performance and regulatory milestones, is typical for companies seeking to de-risk their investment profile for subsequent tranches. The inclusion of a floating conversion price (VWAP-based) and a floor price is a standard mechanism in such instruments, balancing investor protection against downside risk with potential for significant equity participation.

Comparison to Industry Standards

• The use of senior secured convertible promissory notes is a common financing instrument for companies, particularly in the biotech or technology sectors, seeking growth capital without immediate equity dilution at potentially low valuations.
• The tiered tranche structure, with conditions tied to regulatory filings (S-1 effectiveness) and market compliance (Nasdaq listing), is a standard approach to stage capital deployment and align funding with company progress and de-risking milestones, similar to venture debt or structured equity facilities seen in comparable growth companies.
• The conversion price mechanism, set at the lower of a fixed price or a discount to VWAP (95% of 10-day lowest VWAP), is a common feature in "toxic" or "death spiral" convertibles, which can lead to substantial dilution. While the Floor Price provides some protection, such terms are generally considered aggressive for the issuer compared to traditional fixed-price convertibles.
• The 10% annual interest rate and 24% default rate are within the higher range for secured convertible debt, reflecting the perceived risk profile of the issuer.
• The beneficial ownership limitation (4.99%, adjustable to 9.99%) is standard to prevent the investor from triggering Schedule 13D filing requirements or becoming an insider, which is common in such institutional investments.

Corporate Governance

Related Party Transactions

• The amendments are with Ascent Partners Fund LLC, an institutional investor, and involve the issuance of senior secured convertible promissory notes. The filing does not explicitly state Ascent Partners Fund LLC is a 'related party' in the traditional sense (e.g., insider, affiliate), but it is a significant financing partner.

Stakeholder Impact

• **Shareholders**: Potential for significant dilution due to the floating conversion price (95% of lowest 10-day VWAP) and the low Floor Price. However, securing additional funding tranches could support company operations and strategic initiatives, potentially benefiting long-term value if successful.
• **Creditors**: The notes are senior secured, providing a strong position for Ascent Partners Fund LLC. Other unsecured creditors might see their recovery prospects diminish in a default scenario.
• **Company Operations**: Access to additional capital tranches, if conditions are met, provides necessary funding for ongoing operations and growth, reducing immediate liquidity concerns.

Next Steps

• File a registration statement on Form S-1 covering conversion shares for the First and Second Tranches.
• File a definitive proxy statement with the SEC by September 5, 2025, to obtain stockholder approval for the transactions, including the issuance of conversion shares for the Third Tranche.
• Work towards satisfying conditions for the Second, Third, and Fourth Tranches, including maintaining Nasdaq listing compliance and achieving repayment/conversion milestones for prior tranches.

Key Dates

Recommendation

The amendments provide a pathway for Profusa to secure additional capital, which is crucial for its operations and growth. However, the terms of the convertible notes, particularly the floating conversion price and the low floor price, introduce a significant risk of shareholder dilution. While the company has secured an initial tranche, the subsequent tranches are contingent on several factors, including regulatory approvals and stockholder consent, adding uncertainty. Investors should 'hold' to monitor the company's ability to meet these conditions, manage potential dilution, and demonstrate progress that justifies the financing terms. A 'buy' would be premature given the dilution risk and conditional nature of future funding, while a 'sell' might be an overreaction given the potential for necessary capital infusion.

Keywords

Profusa, PFSA, SEC Filing, 8-K, Convertible Notes, Securities Purchase Agreement, Financing, Dilution, Nasdaq, Stockholder Approval, Capital Raise, Debt Financing, VWAP, Floor Price, Ascent Partners Fund LLC