Company: OCEA
Filing Date: 2025-01-13
Form Type: 10-Q
Source: 0001493152-25-001880
Chunk: 196

Company: Ocean Biomedical, Inc.
Filing Date: 2025-01-13
Form: 10-Q
Item: Item 8
Chunk 196
---
 (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 principally by the life of the warrant, the volatility of the underlying shares,
the risk-free interest rate, and expected dividends. Expected volatility is based on the historical share volatility of a set of comparable
publicly traded companies over a period of time equal to the expected term of the warrants. The risk-free interest rate is determined
by reference to the U.S. Treasury yield curve in effect at the time of grant of the warrant for time periods approximately equal to the
expected term of the warrant. Expected dividend yield is zero based on the fact that we have never paid cash dividends and do not expect
to pay any cash dividends in the foreseeable future. We expense the amount for warrants and stock-based awards within other income (expense)
and stock-based compensation, respectively, in our condensed consolidated statements of operations.

Recent
Accounting Pronouncements

In
August 2020