Company: OCEA
Filing Date: 2025-05-15
Form Type: 10-Q
Source: 0001641172-25-011080
Chunk: 64

Company: Ocean Biomedical, Inc.
Filing Date: 2025-05-15
Form: 10-Q
Item: Item 1
Chunk 64
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 on the Closing date until the
36-month anniversary of the Closing, the Legacy Ocean Stockholders shall be entitled to receive an additional 5,000,000 shares of the
Company’s common stock, (b) in the event that the VWAP of the Company’s common stock exceeds $17.50 per share for twenty (20)
out of any thirty (30) consecutive trading days beginning on the Closing date until the 36-month anniversary of the Closing, the Legacy
Ocean Stockholders shall be entitled to receive an additional 7,000,000 shares of the Company’s common stock and (c) in the event
that the VWAP of the Company’s common stock exceeds $20.00 per share for twenty (20) out of any thirty (30) consecutive trading
days beginning on the Closing date until the 36-month anniversary of the Closing, the Legacy Ocean Stockholders shall be entitled to receive
an additional 7,000,000 shares of the Company’s common stock. In addition, for each issuance of Earnout Shares, the Company will
also issue to Sponsor an additional 1,000,000 shares of the Company’s common stock.

The Company has concluded that
the Earnout Shares represent a freestanding equity-linked financial instrument as the arrangement (i) can be indexed to the Company’s
stock and (ii) meets all of the criteria for equity classification within ASC 815-40. The Company performed the two-step analysis described
within ASC 815-40-15 to determine indexation and noted that while the arrangement does contain contingencies, these contingencies are
based on the market for the Company’s stock and do not preclude indexation.

Upon Closing, the fair value
of the Earnout Shares was accounted for as a deemed dividend as of the Closing date. Since the entries to recognize the fair value of
the Earnout Shares offset within additional paid-in capital, there is no inherent impact to the condensed consolidated financial statements.
Since the Earnout Shares are contingent on the Company’s stock price, there will be no impact to outstanding shares and will not
represent participating securities until the time at which the contingencies have been met.

    14

Backstop Agreement

As discussed in Note 2, Basis
of Presentation and Summary of Significant Accounting Policies, on August 31, 2022, AHAC and Legacy Ocean entered into the Backstop
Agreement with Vellar in connection with the execution of the Business Combination Agreement. Pursuant to the terms of