Profusa (PFSA) has signed a non-binding term sheet to acquire a privately held commercial-stage diagnostics and toxicology testing company and appointed director Jack Stover as chief executive officer and executive chairman, the company said Monday.

Profusa said the combined company would operate as a public diagnostics business with national CLIA-certified laboratories serving addiction treatment, pain management and behavioral health markets.

Under the proposed transaction, Profusa said it expects to issue shares equal to 19.99% of its outstanding common stock to the target's shareholders, with the remaining consideration in convertible preferred stock subject to shareholder approval.

Upon closing, the company also expects to raise about $7 million through a 12-month convertible note financing at the transaction's close, subject to due diligence and documentation.

Shares of the company were 9.9% lower in Monday premarket trading.