Company: OCEA
Filing Date: 2025-04-08
Form Type: 10-K
Source: 0001641172-25-003155
Chunk: 327

Company: Ocean Biomedical, Inc.
Filing Date: 2025-04-08
Form: 10-K
Item: Item 2
Chunk 327
---
    F-32

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 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