Company: OCEA
Filing Date: 2025-01-13
Form Type: 10-Q
Source: 0001493152-25-001880
Chunk: 232

Company: Ocean Biomedical, Inc.
Filing Date: 2025-01-13
Form: 10-Q
Item: Item 2
Chunk 232
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 in the Monte-Carlo Simulation, including volatility,
estimated market yield, the probability of various scenarios, including subsequent placement and change in control, and various simulated
paths, were utilized to estimate the fair value of the associated liabilities. We will continue to measure the fair value at each reporting
period, with subsequent fair values to be recorded within other income (expense) in our condensed consolidated statements of operations.

Valuation
of the Ayrton Note Purchase Option

We
utilized the Black-Scholes Merton model to value the Ayrton Note Purchase Option. The key inputs and assumptions used in the Black-Scholes
Merton model, including volatility and risk-free rate, were utilized to estimate the fair value of the associated liability. We will
continue to measure the fair value at each reporting period, with subsequent fair values to be recorded within other income (expense)
in our condensed consolidated statements of operations.

Fair
Values Accounting for Equity-Classified Warrants and Stock-Based Awards

We
measure and record the expense related to warrants and stock-based awards based upon the fair value at the date of grant. We estimate
the grant date fair value of each common stock option using the Black-Scholes Merton model, which requires the input of highly subjective
assumptions and management’s best estimates. These estimates involve inherent uncertainties and management’s judgement. If
factors change and different assumptions are used, our expense recognition could be materially different in the future.

Prior
to September 2022, the value of the warrants issued was estimated considering, among other things, contemporaneous valuations for Legacy
Ocean’s common stock prepared by unrelated third-party valuation firms and prices set forth in our previous filings with the SEC
for a proposed IPO of our common stock that was not pursued by us (“Legacy Ocean IPO filings”). We used the mid-range price
per share based upon our Legacy Ocean IPO filings. Starting in September 2022, following the execution of the Business Combination Agreement
with AHAC, the value of the 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.

Following
the Closing of the Business Combination, the value of warrants and stock options issued by us was based on the closing price of our common
stock as reported on the Nasdaq Capital Market on the grant date. As noted above, we estimate the fair value, based upon these values,
using the Black-Scholes Merton model, which is affected