Company: OCEA
Filing Date: 2025-01-13
Form Type: 10-Q
Source: 0001493152-25-001880
Chunk: 118

Company: Ocean Biomedical, Inc.
Filing Date: 2025-01-13
Form: 10-Q
Item: Item 8
Chunk 118
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 and subsequently remeasured during each reporting period. Changes in fair value are reflected within other income (expense)
in the condensed consolidated financial statements, except for the portions, if any, related to the instrument specific credit risk which
would be recorded in other comprehensive income.

Further,
the Company concluded that the investor’s right to acquire additional Notes is separately exercisable from the 2023 Convertible
Note and the SPA Warrant. If and when the additional Notes are issued, the Company will evaluate whether to account for such additional
Notes at (a) fair value under the fair value option or (b) an amortized cost. Refer to Note 7, Senior Secured Convertible Notes,
for further detail on the terms of the Notes and potential future issuances.

In
addition, the Company determined that the SPA Warrant was (i) freestanding from the 2023 Convertible Note and (ii) classified as a derivative
liability. Accordingly, upon issuance the SPA Warrant was measured at fair value with an offset to cash proceeds from the 2023 Convertible
Note, with the remainder of $0.6 million recorded to other income (expense) on the condensed consolidated statements of operations. The
Company reassesses the classification of the SPA Warrant at each reporting period and record any changes to fair value as necessary. To
date, there have been no changes in classification.

In
addition to the liabilities recorded for the 2023 Convertible Note and the SPA Warrant, the Company also recorded a liability for the
purchase option within the SPA in favor of the investor (the “Ayrton Note Purchase Option”), which gives the investor, at
its option through 2025, the right to purchase from the Company additional Notes (up to the sum of the aggregate principal amount) at
one or more additional closings. The initial recognition of this liability was measured at fair value utilizing the Black-Scholes Merton
model and the fair value of $0.5 million was recorded to other income (expense) on the condensed consolidated statements of operations.
The liability is recorded within current liabilities on the Company’s consolidated balance sheet as of December 31, 2023. The liability
is remeasured at each reporting period and the Company records any changes to fair value as necessary.

    11

Effective
July 23, 2024, the Company entered into further arrangements to fund up to an additional $7.7 million in additional secured notes (the