Company: OCEA
Filing Date: 2025-05-15
Form Type: 10-Q
Source: 0001641172-25-011080
Chunk: 94

Company: Ocean Biomedical, Inc.
Filing Date: 2025-05-15
Form: 10-Q
Item: Item 1
Chunk 94
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1)
    Upon Closing, and as discussed in Note 3, Business Combination and Backstop Agreement, Second Street Capital’s warrants issued from Legacy Ocean in 2022 were terminated in exchange for the Converted Ocean Warrants.

    (2)
    The Legacy Ocean warrant issued in February 2022 was issued with the right to put the warrant in exchange for a payment of $250,000. At the time of issuance, these warrants were recorded as a liability and as Second Street Capital had the intention to exercise the put option in the near-term, the Company determined that recording the liability at its fair value of $250,000 was appropriate.

    (3)
    For further detail on the SPA Warrant, refer to Note 7, Senior Secured Convertible Notes.

    (4)
    For further detail on the Public Warrants and Private Warrants, refer to the “Public and Private Warrants” discussion below.

    27

In 2022 and 2023, the Company
entered into certain agreements with Second Street Capital, Special Forces F9, LLC (“Special Forces”), and McKra for which
it issued warrants exercisable to purchase the Company’s common stock. For each of the warrants issued, the Company utilized the
guidance within ASC 480, Distinguishing Liabilities from Equity¸ to determine whether the instruments should be recorded
as liabilities or as equity. For warrants that are fully vested upon issuance with a fixed life term, the instrument is classified as
equity and the Company recognizes the estimated fair value of the warrant within equity on the date of grant, with the offset be recorded
within (i) other income/(expense) for those issued in conjunction with loans and (ii) stock-based compensation within operating expenses
for those issued to advisors and consultants. Further, for any warrants that are issued in connection with a loan and are not fully vested
upon issuance, the fair value of the debt issuance is amortized over the set term. The estimated fair value for the equity-classified
warrants is determined utilizing the Black-Scholes Merton model, as described below. For the warrant with a put option, 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