Profusa Inc. (PFSA) shares took a hit in Monday's premarket trading, falling 18.5% after the company announced a leadership change and a non-binding term sheet to acquire a privately held diagnostics firm. The stock, which has lost about 99.95% of its value over the past 12 months, was trading at $18.56 in premarket action.

The Diagnostics Deal

Profusa signed a non-binding term sheet to acquire a commercial-stage health diagnostics and toxicology testing company. The proposed combination would create a publicly traded diagnostics company with national CLIA-certified laboratories and recurring revenue from providers serving addiction treatment, pain management, and behavioral health. The target's 2025 net revenue is estimated at approximately $111 million, based on unaudited management information.

Under the contemplated definitive agreement, Profusa would issue common shares equal to 19.99% of its then-issued and outstanding common shares. The remaining consideration would consist of non-voting convertible preferred stock, convertible into common shares following shareholder approval. The company also expects to exchange its outstanding convertible notes and other obligations for preferred stock.

Financing and Leadership Changes

Subject to due diligence and documentation, Profusa expects to raise approximately $7 million at closing through convertible notes subordinated to existing bank debt. The proposed notes would carry a 12-month term, a 9% original issue discount, and a 7% annual interest rate, rising to 18% following a default.

On the leadership front, Profusa appointed director Jack Stover as executive chairman and CEO, effective July 21. Ben Hwang, Ph.D., transitioned from CEO and chairman to president. Hwang resigned from the board on July 26 but remains president. Liviu Goldenberg was appointed as an independent director to fill the board vacancy.

What Is Profusa?

Profusa develops tissue-integrated biosensors that continuously transmit medical-grade biochemical data. Its Lumee Oxygen Platform provides continuous tissue-oxygen monitoring, primarily targeting critical limb ischemia and wound-care applications.

For investors, the big question is whether this pivot into diagnostics can reverse the company's fortunes—or if the stock's dramatic decline is a sign of deeper issues.