Company: OCEA
Filing Date: 2025-05-15
Form Type: 10-Q
Source: 0001641172-25-011080
Chunk: 171

Company: Ocean Biomedical, Inc.
Filing Date: 2025-05-15
Form: 10-Q
Item: Item 8
Chunk 171
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, the Company recorded
a corresponding liability in its condensed consolidated balance sheets as discussed above.

In addition, the Company has
Public Warrants and Private Warrants that were assumed in connection with the closing of the Business Combination. They are treated as
equity-classified instruments, as discussed below.

The use of the Black-Scholes
Merton model requires management to make the following assumptions:

Expected volatility: The Company
estimates volatility for warrants issued by evaluating the average historical volatility of a peer group of companies for a period of
time equal to the expected term of the warrants.

Expected term: Derived from the
life of the warrants issued and is based on the simplified method which is essentially the weighted average of the vesting period and
contractual term.

Risk-Free Interest Rate: The risk-free
interest rate is based on the implied yield currently available on U.S. Treasury zero-coupon issues, with a term that is equal to the
warrants’ expected term at the grant date.

Dividend Yield: The Company has
not declared or paid dividends to date and does not anticipate declaring dividends. As such, the dividend yield has been estimated to
be zero.

The fair value is recognized
on a straight-line basis over the requisite service periods but accelerated to the extent that grants vest sooner than on a straight-line
basis. Forfeitures are accounted for as they occur and requires management to make a number of other assumptions, including the volatility
of the underlying shares, the risk-free interest rate, and expected dividends. Expected volatility is based on the historical share volatility
of a set of comparable publicly traded companies over a period of time equal to the expected term of the grant.

Prior to the Business Combination,
Legacy Ocean estimated the fair value of its common stock considering, among other things, contemporaneous valuations for its common stock
prepared by third-party valuation firms and prices set forth in Legacy Ocean’s previous filings with the SEC for a proposed IPO
of its common stock that was not pursued by Legacy Ocean. Upon execution of the Business Combination Agreement in September 2022, the
value of the Second Street Warrants was based on the closing price of AHAC’s Class A common stock as reported on the Nasdaq Global
Select Market on the grant date.

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Following the Closing of the
Business Combination, the value of warrants issued by the Company was based on the closing price of its common stock as reported on the
Nasdaq Capital Market on the grant date. The Company estimates the fair